"It's like a rape victim," said Sheryl Garrett, founder of the Garrett Planning Network. "They don't want to go through it again."
Garrett started her career as a commission-based advisor in 1987 but quickly realized she wasn't comfortable with the model. She then worked for a couple of wealth managers with "convoluted" fee-based models based on a client's assets under management, their net worth and their earned income. They generally served only wealthy clients.
"It took a worksheet to come up with a quote for prospective clients," said Garrett, who no longer serves individual clients.
She then decided to start her own firm and charge people for her time on an hourly basis. "I wanted to be an outlet for people who needed advice but couldn't pay for it," she said. "I felt that an hourly model was the most fair and most transparent framework where people could see exactly what they were paying me."
Garrett and other fiduciary financial advisors see the recently issued fiduciary rule passed by the Department of Labor as a major step in the right direction of controlling the costs of advice to investors. It applies only to retirement accounts such as 401(k) plans and individual retirement accounts, but advisors to those accounts will now have to act in their clients' best interests.
"People don't have to know a thing about it to benefit from it," said Barbara Roper, director of investor protection at the Consumer Federation of America. "It won't matter as much that people don't understand much about investing or the cost of it.
"If advisors have to act in their clients' best interests, there won't be as high a cost of ignorance."