Fiduciary standard is an RIA's best friend

It beats price, service as top reason advisers win new clients, TD Ameritrade survey finds

Oct 23, 2011 @ 12:01 am

By Lavonne Kuykendall

Every time the debate over the fiduciary standard of client care hits the news, RIAs pick up a few more clients.

Registered investment advisory firms surveyed by TD Ameritrade Inc. certainly think so.

Of 502 RIAs surveyed in August about business trends, 90% said that they either had added new clients or held steady in the past year.

By far, the biggest reason new clients gave for choosing them is because they follow the fiduciary standard of offering advice that is in the best interests of clients. That trumped even price as the top selling point.

A full 29% of the RIAs surveyed picked the fiduciary standard as the top reason that they won new clients, well above the 20% that called price and service the biggest selling points. Last quarter, just 20% picked the fiduciary standard as the top factor, an increase from 15% who picked it two quarters ago.

Clients may not understand the technical terms, but they almost instinctively understand the issue of conflicts of interest and trust, which is the way he explains it to investors, said adviser Christopher P. Van Slyke.

“Brokerages have been good at blurring the line,” he said. “But there is a general awareness that anyone working for a bank or brokerage is pushing product.”

Mr. Van Slyke, a founding partner of Trovena LLC, which has assets under management of about $400 million, said that he sometimes uses the analogy of a patient who has foot pain and asks, “Would you call Pfizer or a physician?”

“The survey results support what we believe is a long-term trend of investors' gravitating to the fiduciary model,” Tom Bradley, president of TD Ameritrade Institutional, said in a statement.

“Over the past few years, we've seen RIAs benefit from money in motion due to disruption at traditional full-commission firms. And as the dust has settled, investors can see more clearly the potential benefits of hiring an RIA,” Mr. Bradley said.

Email Lavonne Kuykendall at lkuykendall@investmentnews.com

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