How Radical Transparency Can Help Independent Advisors Boost Success

What Is Radical Transparency?

Radical transparency is a buzzword in many industries, but for financial advisors, it is the practice of being 100% open with clients about fees, investment risks, rationale behind recommendations, issues you’ve experienced as an advisor, and much more.

Marguerita Cheng, founder and CEO of Blue Ocean Global Wealth, and Carolyn McClanahan, president of Life Planning Partners, shared their take on radical transparency with Investopedia’s Editor-in-Chief, Caleb Silver. They explained how advisors can benefit from incorporating this type of transparency into their practices.

Key Takeaways

• Radical transparency is ensuring clients have all the information they need to make investment decisions pertinent to their circumstances.
• This level of transparency encourages clients to open up about their finances to advisors.
• Advisors that adhere to the concepts of radical transparency are more likely to create long-term relationships with clients.

Understanding Radical Transparency in Financial Planning

At its core, radical transparency is about being candid with others, but its real-world applications vary depending on how it’s used. For Cheng and McClanahan, being radically transparent advisors means being genuine with their clients and acting in their best interests.

“It means communicating to your clients in a way where you are not talking over them, and you’re not talking down to them, but rather making personal finance relatable and accessible,” says Cheng. This often means sharing personal stories, asking the right questions, and looking for opportunities to find common ground.

One of the advantages of this approach is that it allows clients to open up more easily and share information about their finances and goals. This is especially true regarding difficult topics like caregiving and estate planning. “If we learn how to normalize these conversations and how to talk about them comfortably, that lifts a huge weight off our clients’ shoulders,” says McClanahan.

Radical Transparency Can Create Long-Term Relationships

Another advantage of transparency is the potential for developing strong relationships. By helping clients understand the value of financial planning, this approach can build trust and lead to better outcomes. 

A key factor in developing these types of relationships is setting expectations from the start. That includes sharing client engagement standards and letting clients know what they can expect from the relationship. “When I onboard a client, before we even take any money under management, they must do financial planning,” says Cheng. This ensures that her firm can deliver the best possible value for clients and that they’re able to make informed decisions about their financial future.

What Is the Best Explanation of Radical Transparency?

Radical transparency is a concept that promotes disclosure, openness, and honesty in financial advisors. Advisors take the approach that there are no secrets, nothing hidden, and the clients’ best interests are considered when offering advice.

What Is a Red Flag for a Financial Advisor?

Clients should be aware of high fees, a lack of responsiveness, or pushing specific investments.

Is It Worth It to Pay 1% to a Financial Advisor?

Generally, paying 1% to an advisor is not worth it when you can pay hourly rates or fixed fees for the same advice. One percent of your investments could equate to a large sum of money.

The Bottom Line

While still a relatively new concept, radical transparency will likely gain more traction with advisors, especially registered investment advisors. For McClanahan and Cheng, this level of candor is a core part of how they engage with clients. “Being genuine, and being willing to share your stories and making things relatable is so important,” says McClanahan. “We all have issues, and by sharing those issues and being willing to open up those cans of worms, we can do a much better job helping clients.”