I have also heard that it is "none of the client's business how much I earn." Well, I am not suggesting that you share your W-2 or tax return, just what you earn on the transactions you are recommending. After all, clients of advisors who earn fees alone get to know what their planners are earning on the work they do. Some advisors have expressed concern that the client may balk at the notion that a life insurance commission may be $15,000, or much more. That is even more reason for transparency, in my opinion. If you have earned your compensation with the advice you have given, there is no need to be embarrassed by how much you are being paid, and most clients will not object. That certainly was our experience when we disclosed our commissions.
I'm sure we can find many rationalizations for not being transparent in our dealings with our clients, but for me it comes down to the answers to two basic questions. One is, "Is it in the client's best interests to know?" An affirmative answer to that question is obvious to me. The second is, "Does it help to build the profession of financial planning by doing what is best for the clients?" The fact is that we all benefit from doing the right thing. We have a choice. We can begin to act like we are a profession and adhere to the high standards and transparency it demands or we can behave as salespeople and complain that we are not as highly regarded as other professions. In a recent article, Bob Veres asks the question, when is it OK to treat salespeople and professionals alike? One answer might be: "When salespeople begin to act like professionals." Being transparent is one major step in that direction.
Roy Diliberto is chairman and founder of RTD Financial Advisors Inc. in Philadelphia.