Fiduciary Standard for Financial Advisors

A prospective client may assume that a financial advisor, when giving advice, is acting in their best interest.

Fiduciary Standard for Financial Advisors

Indeed this prospective client may have heard the word FIDUCIARY Financial Advisor bandied about by talking heads and journalists in the financial media and that is now a Rule of Law.  For an independent fee-only Financial Advisor (RIA), being a fiduciary will matter a great deal to your ideal client and can be a key if not prerequisite selling point. But they may not grasp the full meaning and intent.

Positioned right, being a fiduciary can be a major point of differentiation from broker/dealers claiming to be financial advisors, but who are associated with vertically integrated brokerage firms that sell products with ‘hidden fees’.

One advisor quoted in the article in a recent New York Times article said  “The fiduciary rule ultimately comes down to the fact that some people are making a lot of money at the expense of other people who have no idea how much their adviser is getting paid.”  A video from a large independent advisor, compares butchers and nutritionists.  Butchers push meat. Nutritionists advise you what to eat, because they have the best interests of the client at heart.  The latter is the fiduciary.  A Revenue Architects client says, “the professional fiduciary is expected to perform and advise you based on your best interests, even if it comes into conflict with the advisor’s own interests.”

Fiduciary Financial Advisor Positioning

The most transparent way for Independent fee-only Financial Advisors to help prospective clients navigate the fiduciary waters is around fees, that is the fees you earn for assets under management, and the fees you don’t charge for the investments recommended.

For example, you don’t:

  • Personally make cash commissions,  ongoing or trailing commission on any investments recommended
  • Make a bonus if you become a client.
  • Stand to gain anything from suggesting one investment rather than another.
  • Receive other forms of payment, say in points that are redeemable for merchandise, services or trips.

Even more involved questions that you can address:

  • How much extra will I pay in fees (or how much might I sacrifice in returns or payouts) if I elect to receive a sign-up bonus on my annuity?
  • What if I want a death benefit for my heirs? Are there specific charges for the insurance component of a product?

The more transparent  you are upfront, the more trusting your prospective client will become and more likely evolve into a new client relationship.  As an asset-based management fee firm, your compensation is directly linked to their investments — that is, you are invested in them.

If you’d like to learn more about develop creative brand strategies and execute innovative growth programs for financial advisors and asset management companies, please contact us.

Also stay tuned for our upcoming 2020 Revenue Architecture for Wealth Managers:  A Playbook to Build Brands & Modernize Growth Marketing Strategies. 


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