Clients Befuddled By Fiduciary/Suitability Standards, Study Says
An overwhelming majority of full-service investment firm clients don't know the difference between a suitability standard and a fiduciary standard, or have trouble defining them, a recent study shows, pointing out that advisors should better inform their clients about the terms of their relationship.

According to the J.D. Power and Associates 2011 U.S. Full Service Investor Satisfaction Study, 85% of full-service clients don't understand that a suitability standard requires advisors to make only investments they deem suitable for them and that the more stringent fiduciary standard requires advisors to act in investors' best interest and disclose all conflicts of interest.

Significantly, the study shows that among those full-service investors who currently are in a fiduciary relationship, 57% state that this relationship increases their comfort level with their advisor, while 42% say that it does the opposite. Higher levels of satisfaction are associated with clients in fiduciary relationships, explained David Lo, director of investment services at J.D. Power and Associates, a fact borne out by the study results. But legally requiring all advisors to adhere to this higher standard-there has been much legislative debate about suitability versus fiduciary-would create additional compliance oversight, and related costs that would be passed on to the consumer, Lo added.

By focusing more on key best practices in client management, advisors can be empowered with more "actionable direction and achieve satisfaction levels on par with satisfaction among investors in a fiduciary relationship-844 vs. 841, respectively," Lo said. The study's ranking methodology measured investor satisfaction in all categories on a 1,000-point scale. Of the 13 full-service investment firms surveyed, RBC Wealth Management ranked highest in overall investor satisfaction (performing especially well in the investment advisor and account information categories), with a score of 814, followed by Charles Schwab & Co., with a score of 805 (performing well in account offerings and Web site); Fidelity Investments ranked third with a score of 796.

Some of the key best practices in client management the study turned up include, in order of importance: Clearly communicating reasons for investment performance; clearly explaining how fees are charged; proactive advisor contact regarding new products and services or accounts four times in the past 12 months; and returning client calls/inquiries on the same business day. Also considered important were reviewing or developing a strategic plan within the past 12 months; providing a written financial plan; and discussing risk tolerance changes and incorporating them into the plan where appropriate, in the past 12 months.

"Proactive outreach from advisors goes a long way in developing the client-advisor relationship, and expectations as far as frequency of contact have increased coming out of the recession," said Lo. "Advisors can meet this increased need by utilizing more non-traditional forms of communication, such as email and the firm's Web site."

Regarding use of online channels, the study shows that 59% of full service investors have visited their firm's Web site in the past 12 months, up from 52% in 2009. Among them, those older than 64 average more than 35 visits per year, compared to Web site visitors younger than 45, who average 12 visits per year, and those between the ages of 45 and 64, who average 23 visits per year. The most common tasks performed are reviewing advisor-posted documents and tax information.

The report is based on responses from more than 4,200 investors who primarily invest with one of the 13 investment firms who participated in the study. In addition to the top three noted above, they include Ameriprise Financial, Chase Investment Services, Citi Group (CitiCorp), Edward Jones, LPL Financial, Merrill Lynch, Morgan Stanley Smith Barney, Raymond James, UBS Financial Services, and Wells Fargo Advisors.

To see the study, go here.

In other news ... 

The Dow Jones Credit Suisse Hedge Fund Index finished May down 0.96%, with three out of ten strategies posting positive performance for the month, according to Dow Jones. Dedicated short bias was the top performing sector, and gained 2.20% as managers capitalized on negative momentum across the equity space; long/short equity funds posted negative performance of 1.68%, but still outperformed long-only benchmarks on both a relative and net exposure-adjusted basis; and managed futures reversed from its positive performance in April, when it posted a gain of 5.40%, and fell in May posting a loss of 4.44% after a pullback in commodities. Go to for further information.

Dublin-based Research and Markets has released Wealth Management Solutions, a new report that provides insights into the Indian financial sector and the reasons for its growth in the last decade. The report details market size for both the global and Indian wealth management markets, and sheds light on the latest market trends, major drivers and challenges. Key players in India that are covered include Reliance Capital, HDFC AMC, ICICI Prudential, UTI AMC, and Birla Sunlife. Go to for further information.

Institutional fund managers have undertaken a dramatic shift to direct hedge fund investing following the global financial crisis, according to a new survey from Citi Prime Finance. The survey, Global Pensions and Sovereign Wealth Funds Investment in Hedge Funds: The Growth and Impact of Direct Investing, notes that contrary to conventional wisdom, smaller hedge funds managing between $1 billion and $5 billion experienced the largest net growth in 2010. At present, $820 billion in direct money from pensions and sovereign wealth funds are now invested in hedge funds, said City. The report is available at

The wealth of Indians has tripled to $3.5 trillion in the last decade (2001-2010), and could rise further to $6.4 trillion by 2015, according to a new report by the information and marketing services firm VRL. South Asia's Wealth Diaspora-Looking Beyond Non-Resident Indians focuses on the wealth of non-resident South Asians (NRSA) from India, Pakistan, Bangladesh, and Sri Lanka, and explores the importance of the NRSA market for wealth management firms. Challenges abound, however, the report notes, and include the lack of a large enough talent pool, regulatory issues and the negative effects of the financial crisis that has left non-resident Indians averse to taking risks. Go to for further information.

Nuveen Investments, which serves institutions as well as high-net-worth and affluent investors, has launched its Nuveen Symphony Floating Rate Income Fund. Managed by Nuveen affiliate Symphony Asset Management of San Francisco, the new fund seeks to leverage Symphony's catalyst-driven credit analysis to invest in floating rate loans and other floating rate debt securities, taking advantage of current low short-term interest rates, said the company. The fund may also invest in other securities, such as fixed rate, and use derivatives to manage risk. Go to for further information.

IPO proceeds in the U.S. surpassed $10 billion for the third consecutive quarter, signaling the ongoing strength and attractiveness of the IPO market as an avenue to raise capital, according to US IPO Watch, published by PwC US. Noted is an increase in the number of companies entering the IPO registration process, with another 77 companies entering the IPO pipeline in the second quarter, an increase compared to the first quarter of 2011 when 52 companies filed. Private equity and venture capital firms continue to lead the IPO market. Go to for detailed information.

As the economy slowly improves, private equity groups have money to spend and are actively seeking companies to acquire, according to a survey of private equity group leaders conducted by mergermarket ( for RSM McGladrey, a U.S.-based accounting and consulting firm. The survey showed a trend toward expansion into new sectors, increased narrowing of industry focus, and heightened third-party due diligence, among other findings. Go to for further information.

A new study, Investment Innovations: Raising the Bar, calls for asset managers and asset owners to work more closely together to add value in the innovation process, better aligning their interests and expectations for mutual benefit. Conducted by CREATE-Research and commissioned by Citi's Global Transaction Services and Principal Global Investors, the study surveyed asset managers, respondents from pension plans, and others from 30 countries with a combined AUM of over $29 trillion, asking them which financial innovations they believe have worked, which haven't, what should be the main thrust of innovations over the next three years, and what specific improvements and actions they want to see related to these innovations. The full report is available at

Delegates to the 28th International Brotherhood of Teamsters Convention in Los Vegas on Wednesday approved a resolution to prosecute chief executives and other Wall Street players responsible for the global financial crisis of 2008, according to the union. The resolution states that while thus far there have been no prosecutions, "not a single worker, pension fund, or home owner has received a government 'bailout,' while the government spent trillions bailing out Wall Street financial institutions." Go to for further information.


Waddell & Reed and Ivy Funds will launch a national year-long "Honoring Our History" tour at the Intrepid Sea, Air & Space Museum in New York City, over the July 4th weekend. A tractor-trailer transformed into a traveling WWI museum will visit 75 Waddell & Reed communities across the country to honor those who served in World War I. Go to for further information.

The Financial Executives Forum, hosted by Family Office Exchange, will be held July 13-14 at the JW Marriott in Chicago. Contact Karen Emanuelson at 312-327-1224 for further information.

FRA's (Financial Research Associates) 9th Annual Hedge Fund Accounting, Auditing and Administration Forum will be held July 18-19 at The Princeton Club in New York City. Go to for further information.

The inaugural Big Ideas for CEE Conference will be held  October 13-14 in Bratislava, Slovakia, featuring speakers that include Gary Kasparov, considered one of the world's top-100 living geniuses, and Ian Scott, former World Bank director. Go to for further information.

The Dow Jones FASTech Conference, designed for venture capitalists, corporate executives and entrepreneurs, will be held November 8-9 at the Sofitel in Redwood City, Calif. Go to for further information.

On The Move

UBS has appointed John Dyment as global head of hedge fund distribution, based in New York. Previously, Dyment was president of Shumway Capital Partners, Greenwich, Conn., and managing director at Deutsche Bank, where he managed the Global Hedge Fund Capital Group.

Bingham, a law firm with 1,100 lawyers in 13 locations in the U.S., Europe, and Asia, has expanded its Securities and Financial Institutions Litigation Group in London with the addition of Mark Dawkins, a former managing partner of Simmons & Simmons.

Regions Bank, headquartered in Birmingham, Ala., has created a Wealth Management Group that integrates the bank's trust, private banking, and insurance units within a single business line. The group will be led by company Vice President Bill Ritter. John M. Turner Jr., former president of Whitney National Bank, has joined as the new Central Region president.

The Forum for Sustainable and Responsible Investment (US SIF) has named Alya Kayal its new director of policy and programs. Previously, Kayal served as vice president for Sustainability Research at Calvert Investments Inc.

First Republic Bank, a private bank and wealth management company, has hired Linnea McArt, former senior vice president at Citi Private Bank in Los Angeles, as managing director of First Republic's Century City office in San Francisco.

Huntington National Bank, part of Huntington Bancshares Inc., based in Columbus, Ohio, has expanded its Wealth Advisors Group in southeastern Michigan through the hiring of Marita Grobbel as senior trust officer for that region. Previously, Grobbel was president and managing director of Northern Trust Bank's Grosse Pointe, Mich., office.

Morgan Stanley plans to rename its retail brokerage joint venture-now called Morgan Stanley Smith Barney-as soon as early next year, according to the Wall Street Journal. A name change for the 17,800-member advisory force likely means the end of the 73-year-old Smith Barney name, which survived the financial crisis and several corporate marriages in the last 30 years alone, Dow Jones News reported. The new name, for which Morgan Stanley has sought client input, has not yet been released.

Northern Trust, which provides financial services for institutions, affluent individuals and families, has appointed Brian P. Donovan managing director of its Stamford, Conn., office. Donovan, who will work with clients on wealth management and trust administration, previously served as a senior manager for high-net-worth clients at Ernst & Young in Stamford.

Wilmington Trust, which serves institutional and high-net-worth clients, has hired Patrick M. Trainor as senior vice president and business development department manager for the company's Global Capital Markets Services group in Wilmington, Del. Previously, Trainor was senior vice president and national sales manager of the corporate trust division at Wells Fargo Bank, N.A.

Renasant Bank, a subsidiary of Renasant Corp., Tupelo, Miss., has entered into a definitive agreement to acquire the Birmingham, Ala.-based trust department of RBC Bank (USA), which serves wealthy clients in Alabama and Georgia. The acquisition by 107-year-old Renasant will not affect the separate trust operations of RBC Wealth Management in the U.S. or RBC Trust Company (Delaware) Limited. The transition from RBC Bank Trust to Renasant is expected to be completed on or before August 31.

-Cort Smith