The term fiduciary has gotten a lot of press over the past few years. Despite this, many of an adviser’s clients and prospects may not know what a fiduciary is and why a financial adviser who acts as a fiduciary could be the best choice for them.
If you act as a fiduciary towards your clients, this can be a great marketing option for you. You do, however, need to communicate why this is an advantage to your clients and prospects in a fashion that they can easily understand.
What Is a Fiduciary?
In the context of being a financial adviser, being a fiduciary means that you put the interests of your clients first. All financial planning and investment recommendations, along with any financial products that might be suggested to implement those recommendations, should be made only with the client’s best interests in mind. Any benefit to you or your firm, such as any compensation received from using one financial product over another, should not be considered.
Being a fiduciary is different from the elevated standard of care now imposed on broker-dealers and registered reps through FINRA’s Reg BI rules that recently went into effect. Though these rules hold these advisers and reps to a higher standard than prior rules in place, Reg BI falls short of a full on fiduciary standard.
Why Is This Important?
Many clients and prospects are more aware of the meaning of a fiduciary and why working with a financial adviser who acts in a fiduciary capacity with their clients can be advantageous for them. If you are a fiduciary adviser, this is something to emphasize in your marketing materials and in your dealings with your clients.
Clients and prospects want to know that their financial adviser has their best interests at heart. Moreover, they want to know that the advice given to them is done solely based on their adviser’s knowledge and experience and is not influenced by conflicts of interest the adviser has in terms of their own compensation or any restrictions put on them by their firm.
If you are an adviser who acts in a fiduciary capacity towards your clients, this is something to highlight in your marketing efforts, on your website and in conversations with clients and prospects. It's not about disparaging other advisers, but rather in highlighting that everything that you do on behalf of your clients is guided by your role as a fiduciary.
How Fiduciary Advisers Differ
Financial advisers who act in a fiduciary capacity are obligated to only recommend financial products, courses of action and other recommendations that are based on what is in the best interests of their clients.
For many years, most brokers were held to a suitability standard that said that recommendations to clients must meet a standard of being suitable to a client meeting a profile similar to their client. Financial industry expert Michael Kitces likens the difference between the suitability standard and a fiduciary standard to purchasing a suit. He says, “Suitability means selling a suit that fits you. Fiduciary duty means it actually needs to look good on you too.”
The move to Reg BI moved the broker-dealer world closer to a fiduciary standard, but the requirements for delivering advice and implementing that advice still fall short of full adherence to a fiduciary standard. One issue that is often cited is that advisers governed by Reg BI may also be registered investment advisers as well, subject to one standard as an RIA, while being governed by a different standard in their role as a registered rep.
If you are a fiduciary, this is something that you should communicate to clients and prospects. But your marketing and communications efforts need to go well beyond this. Let clients and prospects know about your experience, your credentials, the services your offer, the types of clients you serve and all of the other features and benefits of your practice. Give them a complete picture of who you are and why you are the best financial adviser for their needs.