Bill Crager, president of Envestnet, is not going to wait for Washington to figure out the fate of the fiduciary standard. The way he sees it, the market has already spoken. The Chicago-based company, which builds advisory platforms and investment solutions for advisors and broker-dealers, and has a total of $40.5 billion under management or administration, has polled advisors and investors about their attitudes toward one another, and about the nature and quality of the advice clients receive. The results, he says, "blew me away. Not only were advisors trusted, they were being sought." What's more, investors assumed that advisors were using a client-centered thought process, if not a regulatory standard, to inform their recommendations.

Advisors, it seems, are like Congress: Citizens hate the institution, but love their own representative. But clients also believe that their needs should come before advisors'-and the most popular response to the fiduciary concept, by both advisors (56%) and clients (47%), was "It's about time." The firm is stepping up. Despite the fact that momentum toward fiduciary regulation seems to have stopped dead in its track, Envestnet is moving toward the standard and trusting that the investment world will meet it. "I don't think the industry should rely on Washington before it reacts to the issues and opportunities related to the fiduciary standard," Crager says.

But there's one (okay, perhaps more than one, depending on where you sit) important problem with the fiduciary standard: too few professionals have enough working knowledge about it. Execution is the stake that impales many a great idea-and fiduciary seems to be no exception. In Envestnet's poll, only 58% of advisors said they were "very familiar" with the standard. After all the articles, web seminars and media campaigns, the majority of advisors are unclear on how to incorporate a fiduciary process into workflow, or whether they even should.

Beyond the promise of putting the client's needs first-which sounds awfully nice, doesn't it?-comes the nitty-gritty where people and institutions get stuck, unsure whether they're doing the right thing, truly understand the conflicts they face and whether, in the process, they're exposing themselves to liability. "There's clearly a lot of misunderstanding about fiduciary standards, even among RIAs," says Harold Evensky, president of Evensky & Katz in Coral Gables, Fla., and a member of the Committee for Fiduciary Responsibility who contributed to the development of the survey.

As you read this issue, Envestnet has just debuted a platform that incorporates a fiduciary process, should you or your broker-dealer choose to employ it. The initiative could make the fiduciary process as close as possible to automatic and transparent for the approximately 14,200 advisors using its platform, according to the company's updated S-1 statement. (Envestnet is in a quiet period pending its initial public offering, so all numbers concerning the company's performance come from the S-1 filed with the SEC.) An advisor will have the ability to attach virtual notes, akin to stickies, which the company calls FONs-Fiduciary Oversight Notes-to meeting notes, buy orders, investment policy updates, etc., whenever he or she wants to document a decision. Other FONs provide commentary that will help advisors remain in compliance.

"This is the fiduciary opportunity, personified in an implementable format," Crager says. "The technology is turnkey and configurable and scalable across multiple custodians. Then, you have FONs-the breadcrumbs-fiduciary notes left behind. You're making decisions and noting that they're risk-appropriate and cost-effective. You can say, 'Here's why I made this decision' on an ongoing basis. Each time you engage you leave another note behind and it all adds up to a document of a relationship."

In addition, advisors on the platform will have access to a customizable "fiduciary responsibility pledge," which they can use to present their view of their responsibilities toward clients, and the corresponding obligations on clients' part. Additional tools for RIAs and broker-dealers include a dashboard that will show how clients are faring, any style drift within accounts, manager change requests, rebalancing flags and more. "We built reports to try to make the SEC audit process easier," explains Lori Hardwick, executive vice president, advisory services. "We want to engage advisors at the compliance level because it's a major pain point."

As an advisor, you may be wondering why you still need this if you don't have to do it. Envestnet would say, based on its research, that your clients want it-and they'll soon become sophisticated enough to ask for a fiduciary process by name.

BY ANY OTHER NAME

As financial reform initiatives percolated through Washington, Envestnet started preparing the ground for its fiduciary initiative. Their polls of 1,023 investors and 504 advisors, fielded in April, clearly documented a desire for transparency and fair dealing at the same time that they exposed continuing popular discontent and confusion. "During the financial crisis and the fallout that exposed Madoff and a slew of other very disturbing, unsettling scandals, investors were battered by dramatic losses and a stunning loss of confidence in institutions that were once the foundation of trust on Wall Street," Crager observes. "Investors have reacted and a classic cause and effect is evolving. The crisis led to a consumer-driven demand for transparency and trust in their relationships with their advisors." For instance, when asked why they thought a fiduciary standard would be helpful, 79% of investors cited Madoff; another 57% said "People lost too much money." Before you pooh-pooh this finding, bear in mind that the investors surveyed all had at least $250,000 in investable assets, not including their primary residence, so they are a relatively sophisticated group-or they should be.