Frank-Dodd’s end is an opportunity for fintech startups

When I learned that the “fiduciary rule” which requires account advisors to work exclusively in their clients best interests, will no longer be enforced, I thought “wow, can I trust a financial institution?” The answer is yes.

I can trust a financial institution if it creates a policy that it will act in my best financial interest, offers transparent fees, and avoids and discloses conflicts of interest.

It is obvious that large financial institutions won’t create these policies, because these organizations are already successful in earning revenue from programs that are sometimes counter to their client’s interests.

This rigidity of large financial institutions, represents an amazing opportunity for fintech startups to each create policies that provide similar guarantees as the ‘fiduciary rule’. Doing so will focus the company on building a product that is in the best interests of the client. This policy can create a guiding principle for the startup’s approach to its product, customer service, and even marketing. By solving the principle agent problem described above, they will be building products and companies that people love.

Fintech startups are already engaging in this type of behavior. The main proposition of many fintech companies (etrade, lendup, lemonade, and remitly) is simply providing an honest product.