Back in the early 1990s, the National Association of Personal Financial Advisors — led by Ron Rogé, who chaired their public relations committee — launched an aggressive campaign to educate the New York financial press about the many advantages of “fee-only” financial advice. At first, his reception was cool, but Rogé et al. persisted and eventually prevailed, inspiring hundreds of articles in the mainstream financial press about the benefits of fee-only advice. It raised public awareness so successfully that by 1998, Merrill Lynch declared that it was converting its retail brokerage unit to “fee-only” in a massive, nationwide advertising campaign, and the financial services industry has never been the same.
Unfortunately, that’s not the end of the story. As I’m sure you’re aware, neither Merrill Lynch nor any of the other Wall Street wirehouses ever did convert to fee-only. What they did do was add fee-based asset management to their service menu, which enabled many brokers to claim that they were fee-only when they were charging fees, while they also continued to charge commissions to the same clients.
This sleight of hand apparently continues to this day: Back in September 2013, Ann Marsh at Financial Planning revealed that hundreds of brokers had listed themselves as fee-only on the CFP Board’s “Find a CFP Professional” website (despite the fact that the misuse of the term “fee-only” violates the Board’s own standards of professional practice).
The impact of NAPFA’s media campaign continues to be felt today in the increased awareness among the media and the public of the benefits of investor protections that result from a fiduciary standard for advisors that is integral to fee-only advice. This awareness resulted in Section 913 of 2010′s Dodd-Frank Act, and the Department of Labor’s new rules for retirement advisors. However, increased demand for fiduciary advice has also led to increased investor confusion: Adding asset management services to their commission sales has enabled some advisors to claim that they are fiduciaries for their clients — just not full-time fiduciaries, a distinction that by all accounts that I’ve seen is lost on the majority of clients.
As we’ve seen with fee-only labels, investor confusion over who is and isn’t a fiduciary — and when — poses a significant marketing challenge for full-time fiduciary advisors: clearly and effectively differentiating themselves from part-time fiduciaries in the minds of investors who are now clamoring for fiduciary advice. Put another way: How do advisors sell full-time fiduciary financial advice?
One organization that has offered a comprehensive solution to this problem is Charles Schwab. On its new website, FindYourIndependentAdvisor.com, Schwab makes the case for fiduciary advice by marrying that concept with “independent” advice. As a long-time advocate of the marketability of independent financial advice (as opposed to the legalistic sounding “fiduciary”), I’m encouraged that Schwab has come to the same conclusion. Yet in execution, the Schwab approach offers as many lessons about how not to market independent fiduciary advice as it does about how to do so successfully.
A visitor to the website is initially presented with the question “What is an independent financial advisor?” followed by this description:
“Independent registered investment advisors (RIAs) are professional independent advisory firms that provide personalized financial advice to their clients, many of whom have complex financial needs. Because these advisors are independent, they are not tied to any particular family of funds or investment products. As fiduciaries, they are held to the highest standard of care — and are required to act in the best interests of their clients at all times. They are registered with either the Securities and Exchange Commission or state securities regulators.”