Open architecture seemed like a simple enough concept: eliminate conflicts of interest by separating wealth management advice from the sale of investment products. At least that’s what I believed until I received a phone call from the CEO of a public company who needed a bit of advice. A major bank had approached him with what sounded like an appealing investment proposal, and he wanted to know what I thought.

The bank in question had traditionally sold only its own investment products to investors, but had recently begun expanding its product line to include offerings from other investment houses as well. This move was motivated by the fact that the bank, like a lot of other big institutions, was feeling pressure from smaller, nimbler firms that were going after its best clients. These upstart firms were succeeding by providing what had come to be known as “open architecture” service, meaning the only thing they sold was investment advice. They had no financial interest in any of the funds they recommended, and therefore represented their clients’ interests exclusively.

Open architecture was proving to be very attractive to wealthy investors, which is why the bank had approached the CEO with a simple and powerful message: We’ve got open architecture, too!

These guides are intended for educational purposes only and should not be construed as providing advice for investment, tax, legal, or other decisions.