The growing voice of financial advisors demanding to be emancipated from the artificial limitations placed on them by outdated broker-dealers is being heard amid the noise-producing trade organizations pretending to be concerned about middle America's access to affordable investment advice. Advisors who embrace fiduciary freedom wonder why organizations funded and influenced by big institutions insist on using suspect data to support the argument that clients would be better off having hidden charges like 12b(1) fees.

The transparent reality in which many advisors already live represents a credible threat to the existence of financial institutions that insist on preserving outdated business models. In the broker-dealer/RIA segment, these outdated models maintain the notion that product manufacturers can continue to own and control distribution by bundling compensation and distribution expense inside the product.

Intermediary distribution is the term that describes the rep, advisor or agent-someone who functions between the manufacturer and the end client. Product orientation is used to compare various distribution channels. This concept suggests the value proposition is the product.

That thinking is both flawed and instructive. It is flawed because years ago the market moved away from a product orientation to an advice orientation. It is instructive in teaching advisors why their industry partners believe that operating under a fiduciary standard could represent an unacceptable change.

Today, advisors view institutions as the intermediary. Fiduciary advisors are unbundling products and hidden fee elements to allow informed clients to make better choices. This is a major shift in thinking. The trade association crowd is wondering how to wrest control back and find a way to stay relevant within the overall supply chain.

Meanwhile, the fastest-growing advisory firms are embracing the fiduciary standard, whether their industry partners are supportive or not. These entrepreneurs have many common traits; perhaps most prevalent is the desire to be open with clients in terms of the value of their services and the fees they earn for these services.

These are folks who came to recognize the inadequacies and burdens of the rules-based suitability standard. This group was able to see past the regulatory doublespeak and declare: "I'm going to do what's in the best interests of my client. Period. If I do that, I'm comfortable I'll be in compliance." With that declaration, the weight of rules-based standards was lifted. For those supporting the move to a fiduciary standard, the simple act of discussing the issue publicly takes a stand; it strengthens the trust relationship between advisors and their clients.


Matt Lynch is the president and CEO of Capital Analysts, a Cincinnati-based firm that provides turnkey wealth management services to independent financial advisors.

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