With the Senate killing any chance for a fiduciary standard to become part of the upcoming financial reform legislation, it's time to move on and realize that Washington is not all that interested in helping investors (or anyone else who can't cough up sizable campaign contributions).
But advocates of a fiduciary standard for financial advice givers shouldn't view Washington's inaction as a setback. It's actually the greatest marketing opportunity ever — if only fiduciary advisers would stop banging their heads against Wall Street and start telling investors why they're better.
Investors are confused, misinformed and hungry for honesty. They want fiduciary treatment, they just don't know what it is and how it differs from what they probably get from a provider that puts the letters S-I-P-C and F-I-N-R-A in two-point type at the bottom of their web site.
So here's my suggestion, with generous input from our
fiduciary columnist Blaine F. Aikin, adviser
Craig Evans Carnick of Carnick & Co., who actually does what I'm about to tell you to do, and the
Committee for the Fiduciary Standard, an organization of registered investment advisers and others encouraging the adoption of what its name implies.
First, create a simple, five-step statement of how you act with clients. I've adapted the language used by the Committee and Mr. Carnick, but added my own twists. You can do the same.
1) I will always put the client's best interest first — ahead of my own and that of my firm and its employees. As defined by federal law, I will act as a fiduciary.
2) When selecting investments, I will act as the client's agent, seeking the best investments at the best prices at all times.
3) While neither I nor anyone can promise superior investment returns, I will provide impartial advice and act with skill, care, diligence and good judgment.
4) I will provide full and fair disclosure of all important facts, including my compensation from the providers of the products and services I offer, as well as all fees I pay to others on your behalf.
5) I will fully disclose and fairly manage, in the client's favor, unavoidable conflicts.
Step two. Don't keep your statement a secret. Put it in a prominent position on your website. Add it to your newsletters and brochures. Post it on the wall in your office. Print it on the back of your business card. Give out fiduciary T-shirts. You get the idea.
Step three. At every meeting with prospects, show them your statement and tell them you are happy to sign it as a contract covering your relationship with them. Finally, encourage them to shop around and take a copy of your statement with them when they talk to other advisers. Tell them to ask the other providers if they are willing to sign the same contract.
Bingo! No registered rep can sign such an agreement, and hybrids will have to explain when they are acting as a fiduciary and when they aren't.
To play fair, I must remind everyone that RIAs aren't automatically saints and reps aren't automatically sinners. But by not being shrinking violets and by taking advantage of their inherent advantages, fiduciary advisers can snatch marketplace victory from the jaws of legislative defeat.
