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Schwab Shows RIAs How to Stand Out

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For the past 20 years or so, I’ve advocated that the best marketing differentiator for fiduciary financial advisors is “independence.”

While “fiduciary” is a complex legal term, retail investors can easily grasp the advantages of owning one’s own business and doing what’s best for one’s clients, versus working for a large corporation and being subject to its agenda.

However, the “independent” label does have its drawbacks, the main one being there are degrees of independence. That is, some “independent” advisory businesses are more independent than others.

The best example of this independence gradation are advisory businesses that affiliate with so-called independent broker-dealers. These businesses are wholly owned by advisors, and are therefore technically “independent” businesses.

However, they also affiliate with a broker-dealer to get and maintain their securities license. Their BD is responsible for ensuring that the “independent” firm complies with securities regulations, and, more importantly, determines the percentage of the advisory firm’s revenues that it gets to keep.

This payout can give the BD considerable influence over the advisory firm rendering it less than financially independent, yet clearly more independent than employee brokers at Wall Street firms.  

You can see that these shades of independence can create confusion in the minds of retail investors, rendering the term “independent advisor” less than ideal.

Imagine my surprise and delight when I saw that in its new advertising campaign, Charles Schwab has found a clever solution to the problem. (See Schwab TV Ads Tout Advisors’ Fiduciary Status.”)

To be sure, Schwab’s new ads go far beyond simply solving the problem of identifying truly independent advisors. In its five short TV spots, Schwab makes the clearest, strongest case I’ve yet seen for the many tangible advantages of working with an independent fiduciary adviser.

Best of all, in these ads, the RIA custodian has created a template that independent advisors can use to market their services — and differentiate their firms — to investors.

Rather than hitting viewers with a data dump of information, to get its message across Schwab spreads the key points across all five ad spots. In Ad#1 — “Every Investor Should Ask Questions,” Schwab raises the issues that every investor should be concerned with:

  • “Is my money in the right place?”
  • “Am I getting the attention I deserve?”
  • “Is my advisor always objective when making recommendations?
  • “What are we really being charged? And is it eating into our returns?”
  • “Is my advisor a fiduciary? Is he always a fiduciary?”

Then Schwab closes with the statement that solves the shades of independence problem: “And we think a good place to start is with an independent registered investment advisor. As fiduciaries, they live by a simple rule: always act in the best interest of their clients. Their role is to serve, not sell.”

Maybe it’s just me, but I think simply adding “registered investment advisor,” or “RIA” to the term independent advisor is a game changer. It’s short, simple, and rules out independent RR firms that almost exclusively use their BDs’ RIA to manage assets.

The message to investors: “Simply look at the RIA: if it’s owned by the advisor, it’s independent.” Brilliant.

Additional Commercials

Ad #2 “I am an Independent Financial Advisor,” takes a shot at the brokerage industry, and briefly nails down why independence is important: “I am an independent financial advisor. I left a brokerage firm because I wanted to be free of their constraints. At my firm, I act in the best interest of my clients… Fewer constraints, the freedom to do what’s best for my clients That’s why I’m independent.”

Ad #3 “How Are Independent Advisors Accountable to Their Clients?” touts the benefits of independent, fiduciary advice: “I am an independent financial advisor. It’s our name on the door. We are accountable to our clients every day. We have the freedom to plan a portfolio specifically to their needs. We are fiduciaries; stewards of our clients’ money. Entrusted to do what’s right.”

Ad #4 “What Questions Should Your Financial Advisor Ask You?” further differentiates independent RIAs from brokers: “When I meet a new client I start by asking questions, like: did you understand all the fees you were paying? Was your broker a fiduciary? Were you satisfied with the attention you were getting? Then I explain that being independent gives our firm the freedom to give our clients the attention they deserve.”

Ad #5 “Independence Works for my Clients” raises the issue of sales vs. advice: “For our firm, it’s all about trust and transparency. Trust that we do what’s right for our clients without the constraints imposed by traditional brokerage houses, transparency in the way we are compensated. Our philosophy is one of service, not sales. That’s why I’m independent.”

Taken together, these ads are the best public statement that I’ve seen on the benefits of independent, fiduciary financial advice.  And the combination of independence and RIA firms is the best way to identify the businesses that deliver it.

These ads should be a tremendous PR boost to independent RIAs. And advisors themselves should study the descriptions and explanations in them, and use them with their clients — and prospective clients. 


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