Noted thought leader Michael Kitces makes a very interesting point: Advisors who focus on or lead with the fact that they are fiduciaries can actually destroy trust.
Advisors who focus too much on their fiduciary status are making the implied statement that clients can trust them — but trust is earned, not demanded. And bashing other advisors who are not fiduciaries — implying that by definition they are not trustworthy, as Martin Smith did on this week’s “Frontline” program — can create distrust for all advisors and the entire system, argues Kitces.
Trust is created through motives and intent (which fiduciaries can help with), integrity, capabilities and results. The argument that an advisor is trustworthy because they are bound by law seems shallow; many advisors who seem to be in compliance are actually not trustworthy — Bernie Madoff, for example, seemed to be in compliance.
Plan advisors that specialize in the DC market can demonstrate their capabilities through their market focus and client base. Though we as an industry are very limited in our ability to track results in the form of participant outcomes — especially when it comes to the role of advisors — focusing on how an advisor’s efforts are geared toward outcomes is a good start.
Being a fiduciary is great, but explaining why that helps improve outcomes might be a better approach. Starting off by demanding and then expecting trust is not only unrealistic, but might produce the opposite result.
