Advisors face a huge trust gap.

In an industry where members often talk of acting as fiduciary in the best interest of their clients, a majority of investors still believe that their advisors fail to fully disclose conflicts of interest and the fees they charge a new survey by the CFA Institute finds.

Moreover, only 35% of the retail investors polled said that they believe their advisor always puts their clients' interests ahead of their own. Among institutional investors who participated in the survey, that figure dipped to 25%.

Meanwhile, 84% of respondents said that full disclosures of fees and other costs is a determining factor in building a trusted relationship with an advisor. Only 48% said they believe that advisors are making those disclosures.

In many ways, the mistrust expressed in the CFA poll stems from the increasingly elaborate compensation models and business structures in the industry. Likewise, a fractured regulatory environment has also left average investors with little hope of discerning the true nature of the advisory practice where they have entrusted their money, says Chris Cannon, principal and chief investment officer at FirsTrust, a fee-only advisory practice headquartered in Daytona Beach, Florida.

"The waters are so muddy in the industry particularly where the tip of the spear is — touching the retail public — because there are so many different compensation schemes, and there are so many different regulatory regimes," Cannon says.

"I think it's a general sense of confusion that persists," Cannon says. "I think the industry still sort of deserves some suspicion, particularly around the prevalence of variable compensation."

There may also be other fundamental issues at work about how advisors interact with their clients.

Advisor Allan Boomer recently took his colleagues (and himself) to task for too often speaking in jargon when meeting with clients, being dismissive of their ideas and failing to hire younger, more diverse staffers in the practice.

"If we want our clients to love us, we have to do more than just deliver returns," Boomer wrote in Financial Planning. "We have to listen better, present ourselves better, step outside of our comfort zones and find better ways to connect with our clients."

The CFA Institute's new poll supports Boomer's claim. Among retail respondents, 17% said that their most important factor in selecting an advisor was the ability to produce high returns. In contrast, 35% said that the most important factor was that the investment advisor work in their best interest, more than any other issue.

That finding should come as a wake-up call for advisors to redouble their efforts to win the trust of their clients' and prospective clients. Put another way, client trust is not a luxury for the advisor, but a business imperative, according to Rebecca Fender, an author of the new study who heads up the Future of Finance initiative at the CFA Institute.

“I think things like this study show there is a bottom-line value to trust. It's not a 'nice-to-have' — it's something that will impact your bottom line," Fender says. "When a client hands over their money, they want to know that it's somebody who really has their best interest at heart."

The CFA Institute recommends a series of steps advisors can take to address the trust deficit, including making full and clear disclosures about fees and conflicts of interests and upfront assurances that they are in fact acting in their clients' best interest.

This is the third year that the CFA Institute has conducted its investor poll, and trust in financial services overall has been creeping up, though it remains in the middle of the pack, lagging behind sectors like technology but well ahead of others such as government and media.

Of course, the financial services industry is not a monolith, and when asked about subsectors, investors favored wealth managers and financial planners over brokers and robo advisors.

"What you find is the more personalized they are, the more trusted they are," Fender says.

Still, there has been no shortage of unfavorable news surrounding financial services, including wealth management. A couple recent examples highlight a practice unique to the broker/advisor segment. Last month, the attorney general of Massachusetts announced an inquiry into whether Wells Fargo had been engaged in a systematic effort to shift clients from commission-based brokerage accounts to the fee-based advisory side of the practice to drive up revenues for the firm. A few weeks later, a group of investors filed a class-action lawsuit against Edward Jones alleging similar misconduct.

"In orchestrating this scheme to churn revenue from essentially dead assets, Edward Jones made misleading statements and material omissions to their clients ... about the amount of fees they would pay," the investors charged in their complaint.

The arcane compensation arrangements and proprietary products that advisors sometimes push to clients can't help but erode trust in the wealth management sector, particularly when they blow up into publicized lawsuits or investigations.

"It's confusing for people in the industry. I can't even fathom what it would be for someone in the investing public," Cannon says. "It's got to just be beyond understanding."

Cannon would like to see a bright line between sales and service, and says, if he were "king for a day," that he would abolish dual registration so advisors and brokers would have to "pick and split."

He is hopeful that the SEC, in its anticipated rule proposal for brokers and advisors, will address the issue of standardizing titles, affirming certain standards of conduct for anyone who represents themselves as an "advisor."

Already, the efforts of the Department of Labor have helped elevate the issue of fiduciary obligations in the mind of the investing public, Cannon says, a trend that he hopes will continue with further regulatory efforts.

"People are actually calling here and asking if we're a fiduciary," he says, "which is something we almost never got prior to the DoL changes."