Wall Street Journal explains RIAs in article

Sometimes it seems like registered investment advisors inhabit a secret world inhabited only by themselves and their clients. This might be good for creating mystique but it also points to how little progress RIAs have made in gaining visibility.

Don’t blame mainstream media. It is trying — really — to let readers know about the little-known society of independent advice.

An example of that appeared on the pages of the Wall Street Journal last week in an article entitled: Wary investors are seeking out objective voices. The article notes that the top three asset custodians for RIAs won net new assets of $108 billion in 2008 while wirehouses suffered $8 billion of outflows.

The WSJ explains the “objective” advice of RIAs the way another newspaper might write about the rise of acupuncturists in a world dominated by medical doctors. It writes positively about them. But the movement of assets to RIAs still seems to be written about like something that hasn’t been fully vetted by clinical trials.

The WSJ article writes about Connie Ashline, 75, of Kanakakee, Ill. who stayed with her Smith Barney broker when she transitioned to an independent practice. Ms. Ashline praises her broker’s move for how it put her “best interests at heart” in the article.

RIA admits conflicts

After that nod to real people, the article gets explanatory for hundreds of words as it tells readers how to tell a Raymond James rep from a financial planner. It explains the nuance of the RIA’s fiduciary standard and the broker’s suitability standard. The reporters even balance the article by finding an RIA who admits he isn’t wholly objective. The RIA confesses a conflict of interest when, for instance, a client asks whether or not to leave assets in a fee-generating account or to pay down a mortgage.

The WSJ article also tells about how clients can dodge most conflicts by hiring a financial planner and paying it by the hour. It discusses the importance of interviewing multiple advisors and checking their disciplinary history before making a hiring decision.

In short, the article is exhaustive and it’s not surprising to see the bylines of two reporters assigned credit for its writing. It’s density is a reminder of the challenge of making consumers aware of the advantages of hiring an RIA.

Because of its big readership of affluent and business savvy investors, an article in the Wall Street Journal is about as good as it gets as a public relations destination for an article the RIA industry. But the bad news is that this article won’t have investors racing to make a telephone call. The distinction between objective advice and subjective advice is hard to make interesting, engaging or simple by any writer.

At RIABiz, one of my objectives is to better describe the differences between RIAs and other financial advisors. On this matter, I can use help. I’d like to run a posting of the 10 best explanations I can find. Please e-mail me at Brooke@RIABiz.com if you have one and I’ll give you credit for your idea if it makes the list. Here’s the best unabridged version that I could find. I hope yours are much shorter than the NAFEP’s.