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October 25, 2017 at 11:41 AM
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.
