Scott Pritchard | Principal

I have a confession to make. I have a friend who is a broker. There, I feel better getting that off my chest.

Aside from having built a very profitable book of business by the sheer force of his personality and some very aggressive sales tactics, along with jumping from one brokerage house to another for a hefty payday, he’s actually a good guy.

I recently ran into him at a holiday party and he blurted out the following:

“You know, John Smith (the CFO of one of my 401(k) clients; not his real name, by the way) paid you a great compliment recently.

He said that they chose to go with you for their 401(k) plan because you were the only advisor who came in, asked questions and actually listened to their goals for the plan.

John said everyone else came in pitching their product and bragging about how great they were.

You know, I’ve shared that with our team and we’re really going to try to listen more and talk less…”

I tried to be gracious and just said “Thanks for sharing that”, but I couldn’t help but think to myself “Really? They don’t teach that on the first day of “Broker School”?”

But in reflecting back on it later, I was reminded of just how different the Registered Investment Advisor (RIA) business model is when compared to the brokerage firm model. As an RIA, I am legally obligated to put my clients’ interests ahead of my own. Brokers aren’t held to that same fiduciary standard.

Knowing that the brokerage business model is based on selling product, not on meeting clients’ needs, maybe I shouldn’t have been so surprised that actually listening to a client seemed like such a novel idea to my friend, the broker.