One of the strategies that many financial planners use to differentiate themselves is to communicate that they are fiduciaries: legally bound to put their clients' interests before their own. In fact, as the debate about the fiduciary vs suitability standards has increased in recent years, more and more advisors who are subject to fiduciary regulation are promoting it as a differentiator in the marketplace. Yet in reality, most people generally assume that anyone they're doing business with will treat them fairly - at least until proven otherwise. Which means that claiming you're a fiduciary isn't necessarily a differentiator - unless you actually go so far as to bash your competition and accuse them, implicitly or explicitly, of being liars and cheaters. Could this be part of why the fiduciary message doesn't really connect in the marketplace? Because it's turning into a giant negative advertising campaign where you bash the competition instead focusing on the value you actually deliver?
The inspiration for today's blog post comes from an increasing number of financial planners' websites I've seen lately that prominently display that they are fiduciaries, and pose the "why fiduciary" question in their marketing materials to clients.
I would note that I'm a strong believer in the fiduciary standard itself, and that people who hold themselves out as someone delivering advice should be legally required to give that advice solely in the interests of their client. In turn, this means I'm a supporter of organizations like the Committee for the Fiduciary Standard, and the Financial Planning Coalition, in their efforts to attach the fiduciary standard to the delivery of financial advice. Those who want to distribute financial services products are still welcome to do so, without being subject to a fiduciary standard; as long as they present themselves AS salespeople, and not as objective advisors to their clients.
But just because a fiduciary standard may be the right WAY to deliver advice, doesn't mean it's the best way to market and communicate the value of your services to your clients. Because in practice, talking about fiduciary - and being a fiduciary that acts in your clients' best interests - is only a relevant differentiator if the client's other advisors DON'T act in their interests. Which basically means, you're differentiating yourself from the competition by telling your client that their current advisor, to whom they've given their trust and entrusted their life savings, is actually a self-centered evil person who's out to steal their money and YOU are the savior. If a total stranger walked up to you on the street and told you that the people you trust are trying to cheat you and that this person you don't know is actually here to save you, would you believe it? Really?
By focusing on fiduciary, you are effectively running a negative advertising campaign to knock the competition. Except as much marketing research has shown time and again, bashing the competition is a terrible way to market for a number of reasons, including (from a great list at the Straight North blog):
- It makes you look petty
- You convey desperation
- You invite the prospect to look into what's wrong with you
- You imply you have no other significant value to offer
The last point, in particular, may sting the most for many planners. Instead of actually focusing on what you do best and highlighting the value you do bring to the client, you waste valuable limited time in the initial prospect meeting trying to convince the prospect not of the benefits of working with you, but of the negatives of working with other advisors. At the end of the meeting, the prospect may still have little understanding of what you actually do, and the value you offer; instead, they've simply heard an earful while you bashed your peers.
Moreover, if the ultimate goal is to actually develop a trust relationship with a prospective client, is it really helpful to start off a new trust relationship by focusing on distrust and telling the prospect how others can't be trusted? And is it really all that constructive to try to build trust by just saying "I'm a fiduciary, you can trust me" - or should we be spending more time focusing on the activities, behaviors, and methods to actually build a trust relationship with the client?
So what do you think? Is focusing on fiduciary with prospective new clients a little too close to just bashing the competition? Would it be more constructive to focus on your strengths and the value you provide, rather than having the fiduciary discussion? Does talking about trust actually enhance a new prospect's trust levels? Does talking about how others are untrustworthy build trust?