Originally published on Evidence Based Advisor Marketing, July 2, 2018
A survey sponsored by the CFA Institute discussed the importance of trust in the relationship between investors and the financial services industry.
It’s no surprise that the industry suffered immense damage due to the Great Recession, and the appalling conduct of many “name brand” brokerage firms who contributed to that disaster.
Increase in trust levels
While the survey found an increase in trust levels since 2008, only 44 percent of retail investors claim to trust the financial services industry. Trust differs among age groups, from a high of 55 percent for millennials to a low of 35 percent for those age 45-54.
Every investment advisor wants to be perceived as trustworthy. The survey provides an insight into what investors believe contributes towards a perception of trustworthiness.
At the top of the list was full disclosure of fees and costs – an area where many advisors fall short.
Tied for first, was the importance of security measures that protect sensitive information.
Other issues that matter include candid disclosure of conflicts of interest, providing reports that are easy to understand, generating returns equal to, or better, than a target benchmark, charging fees related to value, and having credentials “from respected industry organizations.”
The importance of trust in hiring and retention
The importance of trust can’t be overstated.
By a 2-to-1 margin, investors believe trustworthiness is more important than investment performance when hiring an advisor.
Once you’ve earned the trust of a client, many investors will continue to believe you’re trustworthy unless you demonstrate otherwise.
The role of technology
While it varies by age group (with younger investors placing a greater emphasis on the use of technology), the survey “suggests a strong link between the use of technology by financial advisers and increases in trust.”
If you’re a registered investment advisor, you are already required by law to adhere to high standards that engender trust. But don’t rest on your laurels. Total candor, transparency in all aspects of your relationship (especially fees) and a passionate advocacy that elevates the interest of your client above all else, will serve you well in attracting and maintaining client relationships.
Resource of the week
The 2018 Report issued by the CFA Institute is available here.