The head of Bank of America Merrill Lynch’s wealth unit told attendees at a conference Thursday that fee transparency is key to restoring trust in the financial services industry.
“As an industry we need to create transparency,” John Thiel said at the Securities Industry and Financial Markets Association’s private-client conference in New York, according to a report by Investment News. “We have got to get there in terms of transparency around fees.”
To underscore his larger point, Investment News reported, Thiel recounted an experience he once had as a participant in a focus group. He said that clients couldn’t clearly articulate what they were being charged, and that Thiel was concerned clients felt they were being “gouged.”
According to the Investment News report, Thiel said that while he knows that’s not the case, “if we don’t tell them, where do their minds go?” Thiel said, according to the Investment News report.
Each adviser should present clients with an understanding of his or her fee structure, then a breakdown of per-transaction charges, as well as annual summaries.
Clients are increasingly asking for such transparency, Thiel indicated. One client, Thiel told conference attendees, according to Investment News, said, “Tell me what I pay,” according to Mr. Thiel. “Put it out front, and then I’ll trust you.”
Thiel’s words come amid a growing debate over the possible adoption of a universal fiduciary standard for all financial advisers. Currently, brokers are held to a suitability standard, meaning they can recommend investments that are just suitable. Advisers, on the other hand, must recommend investments that are in the best interests of clients, under a fiduciary standard.
Both the Labor Department and the U.S. Securities and Exchange Commission have been examining for years whether to propose a uniform fiduciary standard for brokers and investment advisers.
“We have to adopt a fiduciary standard,” Thiel said, according to Investment News. “But part of it has to be transparency.”