As major financial firms look to establish more trust among clients, they need to do more to be upfront with clients about the fees that they are being charged for advice and financial products, according to John Thiel, head of Bank of America Merrill Lynch's wealth unit.
“As an industry we need to create transparency,” he said at the Securities Industry and Financial Markets Association's private-client conference in New York. “We have got to get there in terms of transparency around fees.”
After consulting with a group of clients at the firm as part of a focus group, Mr. Thiel said that he found that many were concerned that they couldn't put together an overall picture of what they are being charged.
Although fees may be a touchy subject, it is worse to be vague than upfront, he said.
“It's a euphemism for 'you're gouging us,'” Mr. Thiel said. “We're not, but if we don't tell them, where do their minds go?”
To make it clearer for clients, firms and financial advisers need to provide them with three sets of information, Mr. Thiel said.
Clients need an overall picture of what they pay in fees and commissions, specific rundowns on how much they are charged for transactions and annual summaries that they can send to their tax preparers.
Mr. Thiel related a story of one client who said that he used four advisers because he didn't trust a single adviser with his assets.
“Tell me what I pay,” the client said, according to Mr. Thiel. “Put it out front, and then I'll trust you and start to consolidate with you.”
The issue goes back to a theme that many industry leaders espoused at the conference: doing right by the client.
As advisers look to build a stronger rapport, take a more holistic look at clients' finances and deepen client relationships, building trust will be crucial, Mr. Thiel said.
“We have to adopt a fiduciary standard,” he said. “But part of it has to be transparency.”