There has been an abundance of discussions on whether financial advisors should be held to the fiduciary standard. And what is a fiduciary standard? How does it affect investors? Who really cares? Will the fiduciary standard eliminate conflicts of interest?
First I would like to discuss the conventional business models financial advisors/brokers follow:
The fiduciary debate will continue until a compromise is reached. It is anyone’s guess where this compromise will land. Will the fiduciary standard become so diluted that it loses all credibility? Financial institutions have resisted the fiduciary standard and will continue to resist, because it may cause sales to drop. After all they do not want a standard which puts the client first. If this would be the case how would they make money?
This leads us to a ‘new’ model I named the Client Only Advisor. This advisor has developed a prudent process in building a portfolio. This process involves an academically backed strategy, which over time will result in superior results for the client. If the client decides after implementation that this strategy is not for them the advisor will ask where they would like their account transferred. This may sound like ‘my way or the highway’, but it is really introducing discipline to the investment process. This is where a Client Only Advisor adds value. They will prevent the client from buying high and selling low.
The true value of an advisor is to keep their clients informed and disciplined. They will protect the future you from the current you.