RIAs: What Your Ideal Client Wants from a Fiduciary Advisor

A prospective client tends to assume that any financial advisor giving advice is acting in their best interest. Many have heard the word fiduciary used by commentators in the financial media, but few grasp its full meaning. For an independent, fee-only RIA, being a fiduciary matters a great deal to your ideal client and can be a prerequisite to winning the relationship.

Positioned well, the fiduciary standard is a clear point of differentiation from broker-dealers who present as advisors while sitting inside vertically integrated firms that sell products with hidden fees. One analogy puts it simply: a butcher pushes meat; a nutritionist advises you on what to eat because your health is the point. The fiduciary is the nutritionist — expected to advise in your best interest, even when it conflicts with their own.

Lead with fee transparency

The most transparent way to help a prospect navigate the fiduciary question is to be explicit about fees — both what you earn for managing assets and what you do not charge on the investments you recommend. As a fee-only advisor, you do not:

• Take cash, ongoing, or trailing commissions on investments you recommend.
• Earn a bonus for bringing on a client.
• Gain anything from suggesting one investment over another.
• Receive other forms of payment, such as points redeemable for merchandise or travel.

You can go further and welcome the harder questions: How much more will I pay in fees, or sacrifice in returns, if I take a sign-up bonus on an annuity? If I want a death benefit for my heirs, what are the specific charges for the insurance component?

The more transparent you are upfront, the more a prospective client trusts you, and the more likely that trust becomes a relationship. As an asset-based fee firm, your compensation is tied directly to your clients’ outcomes. You are, quite literally, invested in them — and that is a story worth telling clearly.