Another area of disclosure related to fiduciary duties is the advisor's obligation to take steps to protect client interests in the event of a business interruption. Specifically, advisors need to have a disaster plan in place that is written down and that spells out, for instance, that the advisor would be unable to provide services after a natural disaster, an injury, illness, his death or the death of key personnel in his firm. These are just a few of the many "client-facing" issues to be explored by the fiduciary advisor.
The second area might be called "firm facing." In this area, the activities of the advisor as fiduciary are highlighted. There are many examples of this. One example is in the evaluation of appropriate investments for the client. In traditional terms, advisors typically look at investment goals, performance history, asset allocation mix, fees and other indicators (such as the Sharpe index, relative p/e ratios, etc.). The fiduciary uses the acronym "TREAT," which represents the order in which the aspects of an investment are studied within an asset allocation model. "T" stands for time horizon, the first consideration for the fiduciary. "R" stands for risk; "E" stands for expected return; "A" stands for asset allocation; and the last "T" stands for tax treatment.
Noticeably absent from the acronym is fees. Though fees are important, they are not considered a priority in the investment selection and asset allocation so long as whatever they are, they are prudent and appropriate for the investment vehicle and, most important, fully disclosed to the client. Fees should always be discussed with the client, though not necessarily in the context of investment needs. Instead, fees should be discussed, in detail, in the larger context of benefit/costs to the client, not necessarily as a reason for choosing an investment. Further details on the duties of a fiduciary can be found at the Center for Fiduciary Studies' Web site (http://www.fi360.com).
Rather than seeing the responsibilities of the fiduciary as just another burden, another layer of work, you should see being a fiduciary as a positive step. Not only should you be placed in higher regard by your clients and prospects who recognize and respect your fiduciary status, but it is also likely to provide a marketing edge by offering you differentiation from those practitioners who fail to live up to such standards.
David Lawrence, AIF (Accredited Investment Fiduciary), is a practice efficiency consultant and is president of David Lawrence and Associates, a practice-consulting firm based in Lutz, Fla. (http://www.efficientpractice.com). David Lawrence is a much-sought-after public speaker on a variety of leadership, financial and technical topics. For details, visit http://www.davidlawrencespeaks.com.