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Embrace the Shift Toward Fiduciary-Driven Financial Services

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Fiduciary is a term that is entering the public consciousness dramatically. Advisors and agents should prepare to demonstrate exactly how they are placing their clients’ needs above their own.

Various surveys conducted by financial services companies indicate that 93% of Americans believe that financial advisors should be fiduciaries. Many of those surveyed said that if they found out that their advisor was not a fiduciary, they would either question the advice given or their advisor altogether.

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The bar is rising in wealth management and retirement income planning as more consumers discover the benefits of working with a fiduciary. The recent debate over the conflict of interest rule has fostered an awareness among the public about this topic. Discussions about fiduciary responsibility have many people questioning their assumptions about what makes for a reputable advisor.

Consumers of financial products and services now know the differences between a fiduciary advisor and one who is not. As they discover more, clients are starting to take a more in-depth approach when hiring someone to manage their finances.

Advisors can be sure that they will be asked whether or they are fiduciaries. Their backgrounds and expertise will be subject to greater scrutiny. Advisors wanting to stay ahead of the fiduciary trend must examine some of the most relevant questions clients will ask and prepare their responses in advance to ensure they meet changing client expectations.

Below are a few of the most frequently asked questions I get from prospects and clients, especially the average-income investors who stand to benefit most from the new fiduciary standards.

1. Are you a fiduciary?

This is a direct question that deserves an equally direct response. Don’t try to twist language around to make a prospect believe you are a fiduciary if you are not. A simple yes or no is all you need here.

2. How are you compensated?

Even though most people are somewhat shy about asking this question, it will come up at some point. Again, honesty is the only policy.

3. Are you fee-based or fee-only?

When asked this question, make sure you carefully explain the difference between the two terms. You may want to include your reasoning for choosing one status over another.

4. How will we meet, and how often will we meet?

Most people I meet don’t have problems paying an advisor for providing expert guidance and direction. However, they want some assurance that their planner is available when they have concerns and is interested in more than just a transactional relationship.

5. What are your standards for client success?

Many advisors I meet fail to articulate their standards for successful client relationships. There’s the sense here that, yes, clients do care about monetary success, but they also want to know that their advisors see them as more than just numbers on a spreadsheet.

6. Are there any conflicts of interest of which I should be aware?

Clients are savvier about potential conflicts of interest that could compromise their relationship with an advisor. Be ready to discuss any potential conflicts of interest with a client. Give as many details as needed for them to feel comfortable with your explanation.

If you are not currently fee-based or fee-only, now is the ideal time for you to make the switch. Demand for advisors who adhere to fiduciary standards will continue to be strong as the economy and consumer preferences shift. Transitioning to a fiduciary advising model will allow you to stay relevant and signal your competence and trustworthiness.

Becoming a fiduciary is not a marketing ploy designed to get you more wealthy clients. Instead, it’s a symbol of your commitment to always putting your clients’ goals, needs, and desires first.

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Andrew Winnett Andrew Winnett, CFF, is president of Legacy Builders Wealth Management in Brentwood, Tennessee.