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  • Writer's pictureBrian Traverso, ChFC, AIF, CPFA, AWMA, EA

What Makes an Adviser a True Fiduciary?

I am a proponent of delivering education to friends, family and the public when it involves clarifying the different types of advisers. With handling such an important asset, pun intended, it's warranted to do your homework and know which adviser is right for you.

I have come across an article that does a very good job in shedding more light with this topic and in the interest of not recreating the wheel, I am sharing this article below while highlighting key points that stood out to me.


What Makes a Financial Advisor a 'True' Fiduciary?

Mindy Diamond | Mar 05, 2019

The ability to act in clients’ best interests without limitation is one of the main reasons for the ever-increasing growth of the independent space.

While wirehouse advisors may have every intention of acting as a fiduciary and making decisions with their clients’ best interests in mind, the very nature of working for a big brokerage firm often makes it impossible for them to do so.

The notion of what it takes for an advisor to serve as a “true” fiduciary is a topic I discussed with Mark Tibergien, CEO of BNY Mellong Pershing Advisor Solutions, on a recent podcast episode. Why do so many wirehouse advisors find themselves at a crossroads between acting in their clients’ best interests and serving at the behest of their firm—and what does this mean for the industry at large?

“As we look at the evolution of the financial services profession, consumers, investors and clients are demanding a different relationship—that is, not just about what product is going to be sold to them, but what their advisor is going to do that will be transformative for their lives,” Tibergien stated.

Clients’ constant search for this “transformative” experience is inspiring advisors to create firms that can meet the need. The inability to actually do so within the confines of the big firms is one of the key drivers in the momentum toward independence.

What are the specific differences between those who can serve as a “true” fiduciary and those who cannot? Here are five key characteristics to consider:

1. The Ability to Serve Clients’ Needs First

Captive advisors essentially serve as product advocates for the firm, limited to the technology, products and platform approved by their firms. Whereas independent advisors serve as “client advocates,” with access to the whole of the market—that is, the ability to shop “The Street” for products and solutions that can best serve their clients’ needs.

2. A Higher Level of Transparency

In an independent firm, safe asset custody is separated from the advisor’s business and product manufacturing, creating a process of checks and balances as an integral part of the advisor-client relationship.

3. A Clearer Payment Structure

Unlike the wirehouses, independent advisors aren’t paid on a grid—a performance measure that’s unrelated to client needs. Advisor-client interests are often naturally better aligned in the independent space.

4. The Ability to Think and Act Strategically

Large brokerage firms have grown to the point where managing to the lowest common denominator is a fact of life. Independent firms are far nimbler and can invest in technology or implement customized services that they feel will have a positive impact on their efficiency and service delivery.

5. Optionality When It Comes to Managing Growth, Continuity and Legacy

With the push to sign on to retirement programs a hot topic among wirehouse advisors and the next gen, independent advisors are looking at the future through a different lens. They recognize that they own the firm and look at it as a “business”— with a focus on planning for succession and continuity through inorganic growth and building a legacy with a lifetime well beyond their own.

A Shift in Dynamics

There’s a shift in the dynamics of the wealth management space—it’s becoming less about one model versus another and more about the ability of advisors to play enhanced roles in their clients’ lives.

As Tibergien put it, “When we look at those who are breaking away and forming their own firms, we recognize that they’re making a fundamental change from being an employee to being a business owner, from being a broker to being a fiduciary advisor and from being a product advocate to being a client advocate.”

Ultimately, a fiduciary operates without conflict and with one driving force: the clients’ best interests.

As this sentiment among advisors grows, it will continue to serve as one of the most significant catalysts for migration to the independent space.


Mindy Diamond is president and CEO of Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.


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