What do you stand for?
If I were looking for a financial advisor, that is the first question I would want answered. And I’m not referring to your stance on the active versus passive debate or whether you think a value strategy will beat growth in the long run.
I’m referring to the principles that drive your behavior as an investment professional.
It’s Easy to Get Distracted
Most articles and conferences in our industry focus on sexier topics, including:
- how to find clients using social media;
- how to differentiate your firm from others;
- which sales techniques are most effective;
- what products are performing best;
- how to build the latest and greatest tech stack; and
- how AI can save you time and make life easier.
Notice that they all are about how to grow your business and become more profitable. There’s nothing wrong with that, but as registered investment advisors, we are fiduciaries. We have a duty to put our clients’ interests first, even when it means we make a little less or grow a little slower.
We should remind ourselves of that every day and calibrate our compasses accordingly. Certainly, the world around us will not encourage us to do that. This thinking is out of fashion. Yes, there is the occasional article by fiduciary firebrand Knut Rostad or industry conscience Bob Veres reminding us that we are stewards of our clients’ financial well-being. But these are like messages in a bottle bobbing on a boundless sea of commercial hype.
What We Have in Common
In our effort to grow and thrive, let us not forget who we are. In 1963, the Supreme Court’s ruling in SEC vs. Capital Gains Research Bureau confirmed that every RIA has a fiduciary duty to their clients. This sets us apart from others in our industry.
As Judge Cardozo said in 1928 in Meinhard vs. Salmon:
“Many forms of conduct permissible in a workaday world for those acting at arm's length are forbidden to those bound by fiduciary ties. A [fiduciary] is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate… Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd.”
We are the inheritors of this rich tradition. We are not mere salesmen. We are guides with a sacred duty to our clients.
There are many studies about what clients are looking for in an advisor. While the findings vary greatly, they tend to focus on the skills that clients are looking for in an advisor rather than on the advisor’s principles and character. I suspect this has a lot to do with the way the questions are asked, or at least how the clients interpret them.
I believe if clients clearly understood the distinction between advisors that live under the higher standard described by Judge Cardozo and those who do not, that they would overwhelmingly choose to work with those who do. They would rank duty of care and loyalty above skill and experience.
Stay Grounded in Your Principles
Am I saying that trumpeting your status as a fiduciary to the world is a brilliant marketing strategy? No way. My point has very little to do with marketing.
It is more a reminder and a suggestion. You are a part of a fiduciary tradition that goes back centuries. Be proud of it. Embrace it. Let it guide you. Don’t let the noisy wheels of commerce drown out the voice in your head that tells you to focus on your clients above all else.
If you genuinely embrace your fiduciary responsibilities and let them be reflected in everything you say and do, potential clients will sense it and be drawn to you. Your firm will benefit from this more than it would from the latest lead generation tool or a boost in search engine optimization.
Consider me a keeper of the flame or an old-school nut-job who hasn’t kept up with the times. But I think there is too little said these days about the very heart of what we do and why clients come to us. Let’s bring our foundational principles to the top of the conversation.
We should see ourselves first as servants to our clients and then figure out how to grow and main profitability.
Scott MacKillop is CEO of First Ascent Asset Management, a subsidiary of GeoWealth, LLC. He is an ambassador for the Institute for the Fiduciary Standard and a 47-year veteran of the financial services industry. He can be reached at [email protected].