How often are you presented with the possibility that one elegant solution can help solve two major challenges? Maybe in a business school case study, but not often in real life. But that’s the position banks and their wealth management programs now find themselves.

The first challenge is the fiduciary issue. This has been looming for a long time, and gained steam recently when SEC Chairwoman Mary Jo White said she supports a fiduciary standard for broker-dealers. This came just a few weeks after President Obama said he supported a Department of Labor proposal to require a fiduciary standard for retirement advice.

It’s not clear how these two proposals would work together. But it is clear that this issue has spilled into the public realm, and the banks and brokerages risk being cast as the villain if they continue fighting on the wrong side of public sentiment. Broker-dealers both big and small have to realize at some point that the idea of putting a client’s interest first is simply not as outrageous as some would make it out to be.

The other challenge facing bank programs is in honing a differentiating strategy. When they talk about strategy, they often get caught up in the idea of selling other bank products. That’s understandable, although I’ve always worried it may not be in clients’ best interests, either. Strategy is inherently company-centric: How do we expand? How do we make price increases stick? How do we raise barriers to entry and make things more difficult for competitors?

This is where banks can do themselves a favor. If they embrace the fiduciary issue—really own it, not just pay lip service about how much they’ve always put clients first—that could be the best strategic differentiator of all. One of the main arguments against the fiduciary standard comes down to costs: This one-size-fits-all solution will result in higher prices and small-time investors getting priced out entirely. But as the recent momentum suggests, that’s beginning to fall on deaf ears. At the risk of sounding clichéd, if there were ever a challenge that’s really an opportunity, this is it. How often can a company act strategically while also doing the right thing? 

It’s most definitely a challenge, and a big one. It’s time banks and broker-dealers turned it into an opportunity.


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