3 Issues Financial Advisors Should Address to Overcome the Trust Deficit in Clients
Financial Advisors face a huge trust deficit. That’s significant because who holds a more important position of trust than an advisor who can impact when people retire, how they live in retirement, and what’s their financial security late in life when they need it the most? For advisors whose livelihood depends on attracting new clients and retaining them, that’s a major obstacle to overcome every day.
According to a CFA Institute study, only 46% of retail investors trust the financial services industry. More specifically, just 59% of investors who have an advisor relationship say their advisor is their most trusted source of advice. Even more troubling for advisors, when asked specifically whether advisors always put their clients’ interest first, only 35% of investors agreed. The trust gap widens even further with millennials and Gen X investors, and it is at its widest with widows taking over their account from their deceased husbands.
Unfortunately for advisors, especially those new to the business, mistrust has been baked into consumers’ consciousness for a while. Advisors must assume that every prospect, and perhaps even some of their clients, have trust issues, requiring a conscious and deliberate strategy to overcome them.
Here are the top three issues advisors must confront along with strategies to overcome the trust deficit in clients and become a trusted advisor.
Issue #1: Poor communication
Nothing can lead to mistrust faster than poor communication, which is why it is a top reason clients fire their advisor. According to the Oechsli report – The New World Adviser – clients with $250,000 to $10 million in investment were more worried about clear and timely communication than about investment performance. Solid, open communication is the essence of relationships and trust. When investors experience a breakdown in communication, it’s an immediate indication of the quality of advice they have been receiving. Clients can tolerate the ups and downs of the market if they know their advisor is monitoring the situation and keeping them informed. Even during good market conditions, a lack of interaction can diminish trust and cause clients to walk. Client communications should not be guided by circumstances, but rather a deliberate communications strategy that guides all client interactions.
Learn your prospect’s and client’s preferred communication methods
Effective communications is not necessarily about volume. It’s more about effectively connecting with them through the right channel at the right time.
Maintain consistent communication
Clients welcome regular communications, even if it’s just checking on how they’re doing. This can build trust in two ways. First, it breeds familiarity, allowing clients to feel more comfortable in the relationship. More importantly, it shows you care, which reinforces your client-first mentality.
Listen
Clients and prospects don’t trust advisors who they feel don’t understand them. Always do more listening than talking, using open-ended questions, such as What, Why, How, and Tell me more, to draw out your prospects and clients. Advisors who are effective listeners can better identify critical concerns and tailor solutions to address them directly.
Issue #2: Lack of transparency
Ever since the 2008 financial meltdown, transparency, or lack thereof, has risen to the top of client concerns in an advisory relationship. A lack of transparency demonstrates to prospects and clients you don’t have their best interests in mind. Through the Department of Labor and the SEC’s efforts, with the fiduciary rule and Regulation Best Interest, clients are wise to the fact that some advisors aren’t entirely forthcoming when discussing fees, compensation, and conflicts of interest. According to the CFA Institute report, 84% of investors said that full disclosure is a critical factor in building trust.
While the new Reg BI rules address this concern, advisors must leave no doubt in their prospects’ and clients’ minds about whose interests come first by making full and clear disclosure about fees and conflicts of interest.
Issue #3: Lack of a digital presence
By now, it’s well established that the next generations rely heavily on the internet for information, often preferring to seek their own answers rather than being told what is true. Generally, if it can’t be Googled, it can’t be trusted.
Younger and older investors alike want an advisory relationship built on trust and transparency, as demonstrated through an advisor’s digital presence. It starts with creating a quality website and developing a strong social media presence.
Create a quality website to establish your authenticity.
These days, potential clients go online to thoroughly vet advisors. They’re not just looking for information; they’re trying to get a sense of who you are and what you believe. That means your bio should communicate why you do what you do and convey a substance that goes beyond your professional background. Use videos to help your prospective clients envision themselves communicating with you. Offer opportunities to engage with you through blog posts and links to your social media.
Build your social media presence to engender trust.
For advisors today, having a social media presence is the only real proof of their existence. Social media sites such as Facebook, Instagram, YouTube, and LinkedIn offer the opportunity to engage with your clients and prospective clients where they reside in their digital communities. When you actively engage through your social media, by listening (primarily), offering your insights, and providing relevant content, you reveal more of who you are and that you can be trusted.
The key to building trust with prospective clients is to provide opportunities for them to engage with you, whether through targeted email campaigns, your website, or social media. Over time, it will breed familiarity, which leads to trust even before they become clients.
Watch this 3-minute video to learn how Don Connelly can help your entire team of Advisors to build trust in today’s virtual world.
If you think this presentation would be of value to your firm, please call 941.346.1166 or fill in the form below to send us an email so we can discuss the details and schedule a date for a presentation.
