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Always acting in the best interests of clients isn’t a big ask for financial advisors, but too many don’t take that duty to heart. No federal law regulates who can provide financial advice – let alone give themselves the title of “financial advisor.” This has resulted in low levels of trust in the profession because only those bound by fiduciary duties are required to act in the best interests of the clients seeking their advice.
The way to know if an advisor is acting in the best interest of the client? They offer advice that prioritizes the client’s needs, even if that means the advisor or her firm will make less money. That’s the key to true service.
Fiduciary mindset = long-term mindset
When you’re providing great service that puts clients’ needs first, it is common to build relationships that last decades, often spilling over from one generation into the next. The transparency involved in providing financial services creates a solid foundation for trust. Being transparent and building a level of trust shows that you genuinely care.
But challenges come when exclusively employing fiduciaries on advisor teams. If one of my teammates is from a less client-centric environment, I have to remind them that some of the advice they’ll give might reduce our revenue, but that’s only short term. Reinforce the long-term mindset that acting in clients’ best interests and caring for their needs will pay greater returns down the line. Keeping my client base happy and confident in our services and advice improves retention rates, reducing time and money spent finding new clients. Higher retention also gives my team more time to devote to providing excellent service. There’s a cyclical nature to acting in the best interest of the client, which is good for business.
What’s helped my company is our “true team” approach, where we reduce friction points by providing clients access to the right people for their given situation. Instead of trying to build client relationships centered around a single person, the full team is on their side.
If, for example, one of our senior wealth managers has a client getting ready to sell their business, the wealth manager is empowered and encouraged to bring in members of our team with extensive experience in tax, estate and succession planning to consult on the process. Should that client form a lasting relationship with this new team member, that’s fine. It doesn’t impact anyone’s compensation or bonus structure. Our “true team” approach instills that long-term mindset in each advisor, ensuring that the clients have access to the best guidance at the exact time they need it. I don’t have an environment where an individual is incentivized not to include a subject-matter expert in the conversation for fear they might lose the client to another advisor. Unfortunately, this is an all-too-common conflict of interest that occurs even at firms that otherwise uphold the fiduciary standard.
Finding the right team members to serve clients
Steering teams to act in the best interest of clients hasn’t been an issue for my firm. I’ve been very fortunate, but a large part of that fortune is a credit to my hiring process. It’s rigorous, shaped by our missteps and mistakes from the past. I’ve come to a better understanding of what to look for in talent. The way candidates talk about the advisory profession and their experience is telling. A person’s choice of words is a good indication of whether they’re a team player, possess a fiduciary mindset and will fit well with our culture and hopefully enhance it.
Although I pride myself on not unnecessarily dragging things out, I do put candidates through the paces. Oftentimes, they’ll interview with as many as eight team members. This process does two things: Candidates need patience to go through the process, which says something about their long-term mindset. It’s also about making sure we expose candidates to more than one person. What one person hears from an applicant isn’t always the same as the next. Someone might pick up on what a candidate truly thinks about clients, how they feel about working as a team and how they approach an advisory role.
My team approach has helped my firm attract like-minded professionals drawn to serve others and help them live more satisfying lives. Even in today’s challenging labor environment, I have been fortunate that our guiding light of putting clients’ interests first has served as a beacon attracting others to our mission.
Acting in clients’ best interests can never be up for question. There are a lot of people who need help with their finances. Organizations must grow intentionally to ensure they serve as trusted advocates – not only for existing clients, but also for those waiting in the wings. Fiduciary duties aside, people come to financial advisors for advice. Making more money by directing someone to a product or solution shouldn’t be a goal. Even if the potential reduction in revenue to the firm is sizable in the near term, it’s more important to ensure that the client reaches their financial life goals.
Chris Kerckhoff is president and CEO of Plancorp, a full-service wealth management company serving companies and families in 44 states and managing $6 billion AUM in 2021.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
