Fiduciary standard drives client trust in advisors: Cerulli research

It's hard to quantify the value of trust, but new research from Cerulli Associates attempts to do just that.

In a survey of affluent investors, Cerulli found that 70% of individuals who believe their financial advisors are consistently obligated to act as fiduciaries report being satisfied with their relationships and are not looking for new advisors.

Among affluent investors who believe their advisors may put their own best interests first, just 41% of individuals report being satisfied with their financial planners — a 29-percentage-point gap in client satisfaction compared to those who believe their advisors adhere to a fiduciary duty.

With the wealth management industry still split across different fee structures, experts say it's vital that advisors work to put their clients' interests first if they want to improve satisfaction and retention.

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"When considering their platform offerings, it is essential that providers embrace the spirit of their role as fiduciaries," Scott Smith, senior director at Cerulli Associates, said in a news release. "Every product and service on the platform represents the provider, with the firm's reputation ultimately tied to the least satisfactory client experiences."

Fiduciary advisors make up a small but growing share of the overall wealth management industry. In 2024, just over 85,000 advisors registered with FINRA were listed solely as an "Investment Advisor Representative" — a title that includes a fiduciary duty — with the other 628,000 FINRA-registered advisors working as broker-dealers or some mix of the two.

The share of fiduciary advisors has grown just over 3 percentage points across the past five years, from 8.9% in 2019 to 11.9% in 2024, according to FINRA data.

Much of that growth can be attributed to changes in the industry's preferred fee structures. By 2026, Cerulli has projected that over three-quarters of the wealth management industry will operate under a fee-based model, marking an increase of more than 5 percentage points compared to 2024.

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Research from Cerulli found that financial advisors received 72.4% of their compensation from asset-based fees. Commission-based revenues, meanwhile, have continued to decline, representing 23% of the average advisor's revenue. Advisors say they expect commission-based revenue to decline further over the coming years, according to Cerulli research.

Fee-only advisors do not inherently adhere to the fiduciary standard, but experts say a greater portion of them follow that standard compared to advisors who include commission-based fees in their practice.

Edward Thomas, a financial advisor at Savant Wealth in Birmingham, Alabama, said he has felt the difference first hand.

"During my initial hiring phase in commission land, I was told, 'we expect the average client to buy seven products during their lifetime with us.' [I thought,] 'Are you kidding me? How on earth is that ethical? You know they are going to buy seven things from you, no matter what?'," he said in an email. "It gave me lots of heartburn to work in that world."

Advisors who include commissions in their fee structure can still put their client's best interests first, but doing so requires a very particular arrangement, according to John Bell, founder of Free State Financial Planning in Highland, Maryland.

"If you work for a firm and must use their products in your client portfolios, I am not sure how you can actually be a fiduciary," Bell said in an emailed statement. "On the other hand, if you are commission-based and you work for a firm that is product agnostic, i.e., you don't have to use their funds, insurance, annuities, etc., then I can see how it is more likely they can be a true fiduciary."

Advisors say that the fiduciary moniker is an increasingly important one for prospective clients.

"I know that people are asking me if I'm a 'fiduciary advisor' when they are vetting advisors," said Colin Day, a financial advisor at Mercer Advisors in Chesterfield, Missouri. "Maintaining a fiduciary standard is likely the highest standard [on which] a client could judge their advisor's service, and more and more advisors are moving from commission-based to fee-based and fee-only, not the other way around."

Still, some advisors say going the fee-only route isn't for everyone.

"Clients should absolutely work with fiduciaries, but 'fee-only' doesn't always mean better," Gregory Furer, founder of Beratung Advisors in Pittsburgh, said in an emailed statement. "For some clients — like those who've already paid commissions or need insurance solutions — a commission-based product may be the right fit."

For the small share of advisors in the wealth management industry who can claim to adhere to the fiduciary standard 100% of the time, Cerulli's finding is a boon for client trust. But the survey's results go "both ways," Smith said.

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"Individuals who believe firms can prioritize their own interests [are] most likely to be open to a new provider," Smith said. "Still, the key implication remains the same: clients who are confident that they are in a fiduciary relationship are less interested in new providers. Firms interested in retaining and building long-term relationships will need to remember to put the needs of clients first or risk attrition."

That fact has significant implications for advisors just joining the industry, Day said. 

"Advisors entering the field could better align themselves with where the industry is going by working with fee-based and fee-only firms, and meet expectations of their clients by choosing an advisory model rather than a commission-based one," he said.