Fiduciary Advisors Keep the Industry SustainableBarron's
December 04, 2020
What happens to a crucial resource when it’s exploited nearly to the point of extinction? When it comes to environmental resources, industries have often found ways to adapt. Fisheries have moved to raise fish using sustainable yet profitable methods to deal with the decline in Atlantic salmon. In emerging economies, the environmentally destructive use of timber to help build roads, bridges and housing is increasingly being replaced by sustainable bamboo. In the world of financial advice, the depleting resource is trust, as investors question their relationships with nonfiduciary advisors.
Fiduciary advisors are differentiated in that they commit to putting their clients’ interests first, seek to avoid conflicts of interest, and are transparent in disclosing any conflicts they can’t avoid. The industry needs to recognize the damage caused when advisors lose sight of the long-term harm that comes from pursuing self-centered, short-term gains. Increased investor awareness of the contrasts is driving assets toward fiduciaries and advisors away from less-sustainable, nonfiduciary models.