Going Transparent Can Boost Business

Register now

Wealth management firms say they have always promoted transparency and the elimination of conflicts of interest, regardless of regulatory requirements, On Wall Street contributing writer Paul Hechinger writes in his cover story on how advisors and the industry are tackling compliance in an era of increasing regulation.

While it may sound like the company line for some, there is research to suggest that increasing transparency may go a long way toward boosting an advisor’s business. Cerulli Associates last month released research that found 62% of high-net-worth clients with at least $5 million of investable assets cite transparency as an “extremely important” differentiator in choosing a primary advisor.

Here’s the reason, according to Cerulli: There aren’t many clients who fully understand the fees and expenses that go along with doing business with the financial industry. To put it bluntly, those who “truly comprehend the entirety of their costs are more the exception than the rule,” the firm says in its January issue of The Cerulli Edge - U.S. Edition.

“If [investors] do not see a line item deduction from their accounts, they do not recognize a transfer of wealth from themselves to their advisor or provider,” Scott Smith, director at Cerulli, says.

So transparency may have more payoffs than just meeting stringent compliance and regulatory demands. It may explain why advisors like RBC’s Reva Shakkottai, featured in Hechinger’s story, have endured wave after wave of increased regulations over the years. Shakkottai, who has logged almost two decades in the industry, says her approach is to act in the best interests of her clients while supported by the guidance of her compliance group, Hechinger writes. “I don’t waste mental energy thinking about all of these new rules and getting upset about them,” she says. “There’s no point to that.”

Read more:

For reprint and licensing requests for this article, click here.
Practice management