|Building Trust Is The Best Investment Strategy An RIA Can Pursue, Especially Since Financial Services Is The World's Least-Trusted Industry|
|Tuesday, April 24, 2012 15:18|
Financial services is the world's least-trusted industry, according to a new survey. The way you earn your living is by working in an industry that's often distrusted. While most advisors cringe at being associated with the distrusted financial services industry, it's fair to say they're deluding themselves. Which translates into lost profits. Put another way, nurturing trust builds a valuable asset for your firm.
According to a global trust and credibility survey by Edelman, a global public relations firms, just 45% of informed publics in 20 countries trust financial services firms to do what’s right. The world has not only experienced a global financial crisis but a global financial advisor crisis.
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Like it or not, your profession is ranked dead last on the trust scale. And you, Mr. and Ms. Investment Advisor, are tarred by the same brush as your distant cousins on Wall Street in other far flung corners of the financial services industry.
Investment advisors must carefully nurture trust and guard its role in an investment management business. Particularly at a time when the financial advice business is not trusted, it is wise to ask yourself some questions about how much your clients really trust you. Trust is the currency of profitable business. Just consider the $2.15 billion loss in Goldman stock the day Greg Smith’s damning op-ed article was published.
Keep in mind, trust is not directly correlated with technical expertise. Advisors often confused the two.
Recent research shows that just 15% of an individual's financial success derived comes from technical knowledge, while 85% of your success is due to personality and ability to communicate, negotiate, and lead. Investment skill and technical know-how may be more important to you than to your clients.
To create your own trust barometer with your clients, ask them about:
Keep in mind, trust is not something you earn from a client once and own forever. It must be earned throughout the relationship.
It may also be helpful to ask yourself: Has portfolio performance, innovative solutions, new products, and credentials earn you to the trust of clients? If not, what did earn the trust of clients?
And will doing what you have done before continue to work in the future?
Client engagement and making your clients' needs your first priority build trust. The financial advice business has changed since 2008 and so have client expectations. Qualified investment advice is essential but quickly becoming a component of what clients want and not the end-all.
Try to see the trust component of your client relationships from your clients' perspective. It is the currency of success.
Although most A4A readers are among the advisors that are trusted in the financial services industry, I'm betting that challenging your to build trust with your clients is helpful. Please let me know if I'm right.