Let’s face it: the statistics aren’t in our favor. The financial services industry is one of the least trusted industries globally.
According to Edelman, global trust in the financial services industry as a whole is only at 51 percent. The good news, however, is there was an 8-point increase in trust of the industry in the past five years.
With the DOL ruling, which at this point may or may not be overturned, it will become increasingly important for advisors to truly discover all there is to know about their clients and to put their clients’ needs first and foremost at all times.
While trust has always been a critical element to strong client relationships, it is important now more than ever—whether or not the DOL ruling stands.
What Is Trust?
Trust is a firm belief in the integrity, confidence, reliability, truth, ability, character or strength of someone or something.
Does this definition resonate with you? After reviewing the definition of trust, do you believe that you are a trusted advisor?
Consider taking the time to create a list of the traits that you believe make you trustworthy as an advisor. Also think about taking this same exercise a step further and ask your top ten to fifteen clients why they trust you. Compile the feedback and compare it to the list you originally created. It will be an eye-opening experience for you and will be time well spent, as you can use this valuable feedback with prospects and weave it into your marketing messaging.
Elements to High-Trust Relationships
Trust after all is the foundation of strong, long-lasting advisor-client relationships. According to experts at Wharton, however, trust is often overlooked by many financial advisors. Some advisors actually may take some serious risks when it comes to building and preserving trust through their communication practices, empathic skills and competence in discussing what sometimes can be uncomfortable topics, such as fees or sensitive personal and family issues.
A report from State Street Global Advisors and Wharton suggests that there are three levels of trust in an advisor-client relationship. The first level of trust is about technical competence and know-how. Clients are looking for advisors whose level of experience in their field inspires trust. The second level is trust in ethical conduct. An advisor’s reputation and that of his or her firm is important, as is his or her personal character. The third and likely most crucial level of trust is based on empathic skills and maturity. This level is all about the interpersonal relationship and the advisor’s competence in providing financial advice. Without this element, the relationship with the client is fragile.
Do You Have Fragile Client Relationships?
What is the state of your current client relationships? Are any of them weak? What if you had the ability to actually measure those relationships? Now you can.
According to Dr. Daven Morrison and Dr. David Garfield of Applied Psychoanalytics, based in Highland Park, Illinois, understanding and measuring the qualities in an advisor that contribute to strong client relationships has not been a focus in the financial services industry. For this very reason they partnered with J.D. Power to develop an assessment tool which measures the actual strength of the relationship between a client and an advisor, including trust.
Morrison, an organizational psychiatrist, and Garfield, a psychoanalyst, have spent decades evaluating and training psychotherapists’ trust-building and confidence-building skills. They have applied their experience to financial advisors and propose that the strength of the client-advisor relationship is comprised of five core dimensions: teamwork, respect, communication, durability of the relationship, and value of goals achieved.
Establishing High-Trust Relationships
The key to establishing or repairing trust in relationships is strong communication.
One of the most important elements to strong client communication is active listening. Active listening is a way of listening and responding to your clients that improves mutual understanding. Often we are guilty of not listening attentively when others are talking. We may be distracted and only half listen, while we are thinking about other things.
It’s imperative to demonstrate active listening with clients and prospects. Show genuine interest in what they are talking about and reflect back to them what you heard them say to gain complete clarity. A word of caution—be authentic! You can’t fake this; your clients will sense it if you try to. Don’t concentrate so much on the technique of reflecting back what you heard the client say that you miss them as a person.
It is also important to address emotions and feelings in your conversations with clients, even if it feels uncomfortable to you. In discussions with your clients, if you sense discomfort – if they are avoiding direct eye contact with you, or seem to be pulling away, tensing up or displaying other signs that make you think they are uncomfortable – don’t ignore it. Address their feelings and concerns and use this as an opportunity to foster deeper trust.
The time to take a serious look at the state of your current client relationships is now. In an industry that unfortunately is still largely distrusted as a whole, establishing and maintaining trust is essential. And remember, once trust is established in your client relationships, you can’t put those relationships on autopilot; instead you must continue to nurture and develop them.