Chapter News

    Reason to Trust You

    The following article was written by Carl Richards of Real Financial Advisors and we thought it was worth sharing!

    I know. Honesty sounds obvious, even simple.

    But I keep seeing some members of the industry act like they don’t understand its value.

    Think back to the U.S. Department of Labor’s announcement about the fiduciary standard. The proposal was pretty simple. Anyone who gives advice on retirement accounts and defined-benefit plans needs to act as a fiduciary. In other words, professionals would be required to offer advice that wasn’t just suitable, but was in the client’s best interest.

    Let’s put aside what we call it and unpack the response. Instead of leaping at the chance to be honest with clients, I read a lot of reasons why some financial professionals think it’s a bad idea. Contracts would be complicated. Legal liability could increase. Investor choices might be limited. All of those things could come true. But this response revealed something even more interesting: Honesty has become a differentiator.

    We’re reaching the point where what we call ourselves matters less to clients than whether we’re willing to explain ourselves. I know many financial professionals who can’t or won’t call themselves fiduciaries. But they go out of their way to make sure clients understand any conflicts of interests or fees connected to the advice they provide. These professionals aren’t necessarily required to share this information. They’ve simply figured out that there’s a competitive advantage to total honesty.

    So, why doesn’t an industry that wants to be trusted embrace behavior that makes it trustworthy?

    It comes down to a couple of reasons:

    1- We’re scared

    We don’t know, for example, how people would react if we were to tell them that we earn a commission on the advice we offer. Maybe they won’t care, but maybe they will. Then what do we do?

    2- We’re too comfortable

    The status quo in the industry has been the status quo for a long time. Things like the fiduciary standard are relatively new. For some professionals, total honesty may require some big, uncomfortable changes.

    Look, I understand that what I’m suggesting here is radical. But we’re an industry in desperate need of a revolution. Instead of worrying about being replaced by robo-advisors in the future, we need to worry about being replaced now by someone who’s willing to tell the truth. Don’t you want to be one of those truth-tellers?

    After all, the real value in working with a financial professional doesn’t come from any single piece of advice.

    It comes from building a lasting relationship based on honesty and the sense that you want clients to reach their financial goals.

    Both of those objectives are more difficult if we insist on holding to a standard that doesn’t really suit us as professionals or as people. We want to be trusted, but we’ve got to give people a reason to trust us.

    -Carl Richards

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