An investor is retiring in a few months. He is rolling $1.3 million of assets from his employer's 401(k) plan into an IRA. He has not used the services of a financial advisor in the past, so he decides to use the internet to find advisors in his community. Plus, the internet enables him to learn a lot about advisors without sacrificing his anonymity - until he wants to be contacted.
His biggest challenge is identifying differences that will help him select the best financial advisor.
The internet opens the door to public information about advisors:
- View Paladin Registry research reports
- Read content on advisor websites
- Google search advisor names
- View FINRA/BrokerCheck reviews
- Read advisor reviews
Financial advisors no longer control investor access to information about their credentials, and ethics.
Financial Advisor Websites
How do you stand out in a very crowded, very competitive field?
How do you give investors access to information that differentiates you from other financial advisors?
Differentiation starts with the content on your website.
Differentiating characteristics may determine who investors want to meet with.
A high percentage of financial advisors struggle with identifying key features and benefits that distinguish them from other advisors.
The Fiduciary Role
Differentiation just got tougher. According to Walt Bettinger, President & CEO of Charles Schwab (NYSE:SCHW), the fiduciary standard used to be a differentiating characteristic. But, that difference has deteriorated over the years and the new DOL regulation will virtually eliminate the difference for retirement assets.
A much higher percentage of financial advisors who compete for 401(k) and IRA assets will be fiduciaries. Salesmen can still compete using the BICE clause in their service agreements, but they will have a distinct disadvantage when they compete with fiduciary advisors.
When everyone is a fiduciary, it ceases to be a differentiating characteristic.
Top 9 Differentiators
In a totally transparent environment, there are nine characteristics that can differentiate you from financial advisors with different business models.
- Registration (RIA, IAR)
- Fiduciary status (retirement and personal assets)
- Credentials (Experience, education, certifications)
- Compliance record (clean, frivolous claims)
- Method(s) of compensation (fee, commission, both)
- Open-architected solutions (no proprietary products)
- Employer or licensing entity (independent, bank, insurance company)
- Breadth of financial services (planning, investment, insurance, tax)
- Combined expenses (all layers of expense, percent of assets)
The 10th Differentiator
You are very familiar with all nine differentiating characteristics. There is nothing new on the list.
The 10th differentiator is transparency on your website. It is what you say and don't say about you and your firm that will make a difference:
- You tell prospective clients you are fee-only, but you do not tell them what the fee is
- You tell investors you are a fiduciary, but you withhold information about potential conflicts of interest
- You claim to have years of financial experience, but you do not disclose the type of experience
Only the best advisors can afford to practice transparency because they have nothing to hide.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.