A Fiduciary Advisor – What it Means Now & in the Future
Based on the recent regulatory changes mandating more fiduciary standards for stock brokers, the issue has been in the news a lot lately. The standard has a fairly basic regulatory definition when pertaining to investment advice. Regulations require fiduciaries’ advice given to be in the BEST interest of the client, not just suitable for the client.
Fee-only Registered Investment Advisors and Certified Financial Planners have been held to the fiduciary standard for years and we feel they have (and still do) hold a strong competitive advantage over brokers because of this higher standard of care. But we feel acting in the clients’ best interest is just the start of the role for the independent fiduciary investment advisor to retain that competitive advantage over not only brokers, but DIY and Robo solutions as well.
As fee compression persists thanks to the investment management efficiencies gained from the latest fin-tech tools and because of more transparency and news coverage on advisor compensation, the fiduciaries’ role will likely have to expand further to justify that 1% management fee that is currently commonplace in the industry.
A full-service fiduciary advisor of the future charging 1% should:
- Be an informed confidant in times of financial and emotional distress
- Have the capacity to build a financial plan that is constructed with your goals, your best interests at heart, and consistent with your values for money.
- Serve as your coach who will help you stay on track with your financial plan each year
- Vet proposals from other professionals – insurance agents, estate planners, accountants, mortgage bankers, realtors, etc. to help you avoid being ripped off or mistreated.
- Coordinate with your other professionals to ensure your financial team is on the same page in managing your financial life.
- Have a stable of trusted and vetted referral sources in complimentary professional services fields to execute portions of the plan outside the advisor’s purview.
This type of care, coordination, and expertise is well worth paying for. The firms with the capacity to provide this service as a next-gen fiduciary will likely flourish. Those limiting their scope as a fiduciary to investment advice may struggle to stay relevant as advisory firms are faced with more competition from various online platforms that offer sophisticated investment management at a price not economically feasible for human advisors to match.