I guess I shouldn’t have been surprised when a major industry magazine called the release of today’s Financial Reform Bill a victory for Wall Street in that it did not mandate that all people who sell securities be held to fiduciary standards. Not surprised but certainly disappointed.

This is a shallow victory at best. In fact, I dare say it is a loss – especially for those advisors who fail to see that in the minds of clients they are fiduciaries; and for those sponsor firms that will not encourage their advisors to pursue fiduciary credentials in any case because it is the right thing to do. It is a classic case of perception versus reality. If you are perceived as a fiduciary you should act like one!

And, oh by the way, those advisors who are “forced” to be fiduciaries – don’t you think they will use the fact that you are not against you? If I was in production, it would be the first thing that I would discuss with clients and the first question I would ask them to ask their current advisor.

All any one of us has is our reputation. As I have said before, holding yourself to fiduciary standards is the right thing to do regardless of the rhetoric. Separate yourself from the competition. Do the right thing – and perhaps some day financial services professionals will get some positive press!

The issue of which advisors will ultimately be held to fiduciary standards  is bound to continue into the foreseeable future. Clients, however, are more concerned with how you – their advisor – is looking after their particular interests now.

How do you demonstrate to your clients that all of your actions are in their best interest? A good place to start is by looking at the message of  The Committee for the Fiduciary Standard. These principles, or some variation of them, should be part of your Mission Statement, Value Proposition and the stated principles which govern how you operate your business. First – talk the talk – it will help differentiate you from the competition.

Then you must walk the walk – your actions must follow your words. Here is a little quiz. Is it ethical to say to a client “I charge a fee of 1% of the value of your investment portfolio, a fee much lower than many of my competitors”? This statement is misleading because it fails to mention the costs that are associated with the actual investments – the client’s  total cost. In fact, it is likely that the total cost the client pays will be the same as, or close to, what the competition charges in an “apples to apples” comparison. This example demonstrates actions which are contrary to the principle of fully disclosing all information to the client. Your actions affect your clients much more than any proposed legislation!

Demonstrate your value-added to your clients and always follow-through on your commitments. Then all of this talk about who is and who is not a fiduciary is less likely to distract and sidetrack you (and your clients).

The March 3rd article in the New York Times entitled Trusted Advisor or Stock Pusher? Finance Bill May Not Settle It raised the public profile of an issue that has been swirling around the financial services reform debate for a long time – should advisors in the brokerage industry be held to fiduciary standards (as RIAs are)? The title and content of this piece miss a few very important points:

1) Just because you’re not held to fiduciary standards, you’re not a stock pusher! There are many qualified advisors at brokerage firms, and their motives and reputations should not be questioned just because of where they work. Criticism of the industry is in vogue today – but  we shouldn’t lose sight of the fact that there are many qualified advisors out there helping clients.

2) No new regulation (Bill) and no standards are assurance of quality. Clients must still assess whether the advisor that they have chosen is truly acting in their best interest. And advisors must be able to proactively demonstrate to clients – regardless of whether are are a fiduciary by law or not – how they act in the best interest of their clients.

Our next blog will focus on what advisors can do to make their case to clients.