Today's Advisory Career

The Future is Fiduciary

A key focus on advisors, technology & client demand

by Mitchell H. Caplan

Mr. Caplan is CEO of Jefferson National. Visit

Just as the DOL Fiduciary Ruling is enforcing fundamental changes in the retirement industry, to adjust operations and procedures to serve clients with greater transparency and greater value, likewise it is driving similar changes among many product providers and advisors themselves.

In fact, there has been a secular trend in this direction, increasing in force over the past decade. Now, many more advisors are looking to fundamentally shift their practice to a fee-based structure that focuses on the clients’ best interest.
With the Department of Labor providing more clarity in their recent FAQ release, advisors are seeing some positive confirmations concerning provisions of the rule that draw lines between fiduciary and non-fiduciary.

However, there is still much to be determined, including what these changes will actually look like on a company level and the timing of the rule’s rollout. Whether the rule will go into effect in April, or be pushed out two years due to changes in Washington, one thing is certain: Fiduciary is here to stay. It is here to stay in financial advice, here to stay in technology, and here to stay in consumer sentiment. Advice-givers have two choices: Get on board the train or get left behind at the station.

Fiduciary is here to stay: Financial Advice

The advisory industry has been moving from commission-based sales to fee-based and fee-only advice, and the pace is only accelerating. According to Cerulli, AUM managed by RIAs and fee-based advisors will increase more than 60% from $4.1 trillion in 2015 to $6.6 trillion in 2019, and RIA and fee-based advisor headcount will expand from 59,000 to 67,000.
As demonstrated by the momentum of the fee-based and fee-only channel, a growing number of advisors recognize that putting clients’ best interests first is not only the right thing to do, it is also beneficial for their business.

As we saw in this year’s Advisor Authority study of more than 1,300 RIAs fee-based advisors and individual investors nationwide, the most successful advisors are more likely to focus on providing holistic unbiased advice, and more likely to serve clients using a fee-based fiduciary standard. Recent Investment News and FA Insight benchmarking studies also reveal that the most profitable and highest growth firms continue to be those that adopt the AUM fee.

Fiduciary is here to stay: Financial Technology and Solutions

...One thing is certain: Fiduciary is here to stay

More advisors are using technology to refine their practice, enhance investing and advising capabilities, and ultimately serve clients more efficiently and more profitably at every end of the investing spectrum. At the same time, advisors must ask themselves this fundamental question: How can I use technology to create more value for my practice, while serving my client’s best interest and maintaining a fiduciary standard?

As more advisors shift to the fee-based and fee-only model, an increasing number of manufacturers, distributors, and technology providers are developing and adopting fee-based products and solutions to fit the fiduciary future, by providing greater transparency, simplicity and more choice. For example, this past summer PIEtech developed their Best Interest ScoutSM tool, with the tagline: “Your firm’s DOL solution.

The tool aims to evaluate the full financial circumstances of a client in accordance with Department of Labor requirements. Given the increase in consumer demand for holistic and unbiased advice, this type of financial technology presents an opportunity for advisors to re-engineer their practice to increase their competitiveness, attract more clients and drive greater growth.

Fiduciary is here to stay: Consumer Sentiment/Client Expectations

Driven by demands for greater simplicity and transparency, downward pressure on fees, and an industry-wide movement towards putting the client’s best interest first, it will be imperative for advisors to maintain a fiduciary mindset. The financial services companies that focus on the end consumer – by providing a wider range of solutions, superior customer service, and a greater choice of delivery channel – will be the winner. Client expectations for the fiduciary standard are established and here to stay, regardless of regulatory decisions or changes. Those who fail to recognize this trend are likely to go extinct.

This is true not just for advisors, but also industrywide. The industry is still learning what fee-based and fee-only advisors have known for years: When you put the power back into the hands of the consumer and you sit on the same side of the table as your client, both you and your client can succeed. After all, what financial advisor wants to be seen as not putting the client’s interests first? Educated consumers expect it and demand it. ◊