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How Financial Advisors Can Lever the Fiduciary Standard

By Ray Sclafani | July 10, 2012

You may have seen this provocative article in this past weekend’s NY Times, “A Fancy Financial Adviser Title Does Not Ensure High Standards”.

This got us thinking about the proposed fiduciary standard, and we thought it would be an appropriate time to offer some observations on how financial advisors can leverage the fiduciary standard to further improve their practice.

While the SEC has yet to weigh in on a new or revised fiduciary standard for brokers, insurance agents and others who aren’t currently subject to it, recent revisions to the suitability standard are raising the bar. New addendums imposed by FINRA to suitability regulations are seen by many as veering close to imposing fiduciary rules on brokers.

The biggest change in suitability rules surrounds a requirement that the investment strategies brokers select for their clients be suitable based on the client’s age, investment experience, time horizon, liquidity needs and risk tolerance. FINRA plans to interpret the new rules broadly so that any recommendations a broker makes to clients to buy, hold or sell an investment will fall under the new suitability standards.

Regardless of what the SEC does around the fiduciary standard, it’s clear that all brokers, investment advisors, financial advisors, wealth managers and insurance agents are going to have to deal with a higher obligation to their clients. What we don’t yet know is if that will be in the form of an enhanced suitability standard or new or revised fiduciary rules

So how can you, the top-performing advisor, prepare for what’s to come when you don’t know exactly what it’s going to look like? From our perspective as a coaching company who conducts proprietary research into the practices of top-performing advisors, we believe the answer to complying with whatever fiduciary standard comes down the pike is to improve your processes surrounding all aspects of practice management.

Improved processes aren’t just the answer to keeping regulators off your back. They will do that because those improved processes will keep you and your team accountable in terms of documenting client meetings, phone calls and goals and also from engaging in practices that can be seen as a conflict of interest.

The real benefit goes beyond simply complying with the impending regulations. The real benefit of implementing processes in all areas of your practice, as identified by the ClientWise Professional Advisory Model™, is that your practice will be able to:

  1. Deliver a superior level of client services,
  2. Attract clients that fall into your ideal client type and
  3. More successfully connect with potential professional and client advocates than ever before.

Processes aren’t the magic solution. They take hard work to craft and implement across your organization. However, they are also a tool that enables your wealth management practice to grow more quickly and comply with whatever suitability and fiduciary standards regulators come up with in the future.


For a complimentary ClientWise Learning Tool on how you can implement processes using the Fiduciary standard, please see below:


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Topics: Business Development Leadership

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