Consumer Perceptions of Financial Advisory Titles and Implications for Title Regulation

Abstract

Many professionals in the financial services industry refer to themselves as financial advisers despite tremendous variation in business practices, compensation methods, and duties to act in the best interest of their clients. As a result, both the Securities and Exchange Commission (SEC) and state securities regulators have considered title regulation aimed at promoting consumer clarity. While a recent SEC proposal was ultimately discarded, there is little empirical evidence to inform how consumers actually perceive the use of such titles. This study examines consumer perceptions via a survey of US consumers conducted using Amazon’s Mechanical Turk (n = 665). Findings suggest that consumers perceive common industry titles as different from one another in a manner that is consistent with the differentiation of advice professions (e.g., financial adviser, financial planner, financial consultant, investment consultant, investment adviser) from sales professions (e.g., investment salesperson, stockbroker, life insurance agent). Implications regarding the potential efficacy of proposed regulatory frameworks are discussed.

Keywords: financial adviser, investment adviser, brokers, perception, title regulation

JEL Classification: G23, D12, D14, D18