I’ve gotten a lot of questions about what I think about DOL Fiduciary rule from a marketers’ perspective. I’m certainly not a regulatory expert, but I look at things through the eyes of a consumer, and I think about what that means for positioning and promoting what we do. We’re all trying to figure out if this is a crippling event for our industry, or an opportunity that can be embraced and marketed. The answers depend somewhat on your current business model, but I do have some opinions that cut across models and are based on how consumers feel, think and make choices about where to go for financial help.
The Language Of “Fiduciary” And “Suitability”
I wonder how the evolution of the advice business would differ if we had thought harder about the words “fiduciary” and “suitability” and what they mean to consumers. In a focus group, one consumer said to me that the word fiduciary felt, “icky to say.” It does not roll off the tongue easily, and it doesn’t explain itself at all unless you are familiar with Latin (fidere means to trust). In contrast, suitability seems just fine to people. What they wonder is, how can something be suitable and not trustworthy—acceptable but not necessarily best for you? Who would ever pick untrustworthy over trustworthy if they knew the difference?
After examination, the terms and rules we’ve been operating under don’t feel true to people. The American public doesn’t understand financial services lingo, and the financial services industry thinks the language makes sense. It doesn’t. The public is confused. Our language is opaque and misleading; what people want to know is can they trust their advisor? We now need to address that question in understandable terms.
The Problem We Have Goes Beyond Words
I’ve been in industry meetings where some executives of the nation’s largest firms have pointed fingers at Washington, D.C. for pushing the complex changes we now face. Give me a break. We need to own up to the fact that consumer distrust is largely our fault—not all of us, but the bad apples and the misaligned profit drivers of our industry have left people without faith. It doesn’t help that we then communicate with a lack of candor and transparency.
Every time we see consumer sentiment towards financial services healing, news breaks that casts more shadow. A study from the National Association of Retirement Plan Participants (NARPP) had consumer trust in financial services at 13 percent in 2015 and I just heard it’s dropped to 8 percent in 2016. A friend, who is part of the Ad Council, told me that there is only one industry with an image problem worse than ours, and that’s big oil. That’s sad.
Simplicity As A Rule
Consumers have just heard that the government had to step in to protect them from us when we are handling their retirement savings. Is now really the time to mince words, or play with fine print? No. We need to move to one standard across all clients and account types, with rare exceptions. That standard, in simple terms, should be that we always put customers’ interests ahead of ours. For some of us, we’ll be changing business practices so more people can get the ongoing advice they need in human-speak.
Consider the Best Interests Contract Exception (BICE), a phrase that sounds like an undesirable loophole with an acronym that rhymes with VICE. Do we really want to have these conversations with people about being only a partial fiduciary? We’re creating complication and suspicion when we need to be simplifying and conveying trustworthiness.