Does your client know what a fiduciary is?

May 26, 2017 by Sean Marus

An advisor discusses his fiduciary status with a client

About the author:

Sean Marus

Content writer

With years of experience in the financial services industry and a degree in writing, Sean is committed to providing relevant, accurate, and easily-accessible information to clients and advisors across the world.

According to a recent survey from Financial Engines, only 32 percent of Americans have heard about the Department of Labor (DOL) fiduciary rule. From the same survey, only 21 percent of respondents said they definitively knew the difference between a financial advisor who identifies as a fiduciary and one who does not.

Over the past year, there was a relatively small increase in the percentage of respondents who knew what differentiates a fiduciary and a non-fiduciary. However, there is still a clear lack of knowledge surrounding the DOL ruling and how it might affect the average consumer.

Given Alexander Acosta’s recent statement that the DOL fiduciary rule will no longer be delayed as the Labor Department continues to seek public opinion on the rule, preparing for the rule’s full implementation is paramount. As an advisor, here are a few ways that you can leverage this opportunity to cement a trusting relationship with your client base.

Communicating your status to your clients

As mentioned earlier, the rule will almost certainly go into full effect by the beginning of 2018. The clients that are aware of the ruling are expecting their advisors to act in their best interests in the time leading up to implementation, regardless of whether or not the fiduciary rule is legally enforced. Before the final version of the fiduciary rule is completed, reiterate to your clients that you are operating as a fiduciary on their behalf and will continue to do so in the future.

Improving trust through communication

Based on findings from the Financial Engines survey, 38 percent of respondents were unsure of whether or not their advisor was a fiduciary. Simply put: most clients need additional information from their financial professionals to help educate them on what makes an advisor a “fiduciary.”

If your clients are unsure about what it means to be a fiduciary, send them some background on the DOL rule, how the Best Interest Contract Exemption functions, and how you generally fit into the recent legislative updates regarding the expansion of the protection of account holders under Employee Retirement Income Security Act of 1974. With this, you can further cement yourself as a trusted source in their life.

Fortifying client relationships

In addition to the trust you will gain by supplying information to your clients, openly communicating with your clients will help solidify your status as the center of their financial world. An advisor who proactively communicates with clients and actively engages in their lives is an advisor who can separate himself or herself from the competition. In an increasingly competitive space, especially in light of the DOL rule, the ability to assert yourself as a caring, proactive, trustworthy source is invaluable.

Download our whitepaper to learn how effective communication can help facilitate and foster your client relationships.