Tackling today’s number one client challenge
Talk to advisors about the challenges they face today and you’ll get a lengthy list – often headed by unhappy clients, reduced income and a struggle to stay positive and productive.
While these are all serious issues, for most advisors they are dwarfed by the number one obstacle to getting business back on track – and that’s rebuilding client trust in our competence and our integrity.
Given the intangible nature of advice, it’s impossible to have a functioning relationship without a minimum threshold of client confidence.
The good news? There are clear steps that every advisor can take to begin the process of reestablishing trust.
One investor’s story
Rebuilding trust starts by understanding what’s led to its decline.
While recent performance may have been the catalyst for consumer skepticism, this is far from the sole cause.
A recent article in Atlantic Magazine titled “Why I fired my broker” detailed why one investor became disillusioned with his advisor. In the article, he quotes a high profile US money manager to the effect that “the financial system is rigged against the average investor” and talks about the absence of contact from his broker since last fall.
The good news is that he has not given up on the industry, but he is much more guarded going forward.
His parting sentences:
“Our main job now is finding someone to advise us. This is a very difficult task.
This search is made more difficult because we don’t have enough money to make ourselves interesting to most of the best advisors and the typical advisor is not sufficiently independent-minded to be effective.
Unconventionality makes me nervous, but less so than conformity. I’m finished with conformity. In picking an advisor, I’m also looking for someone who is unleveraged; someone who is putting his own money into the investments he’s recommending and someone who can explain to me, in a few sentences, in language easily understood by earthlings, his philosophy of investing.”
To read the article: http://www.theatlantic.com/doc/print/200905/goldberg-economy?x=23&y=2
Begin by taking responsibility
So that’s the problem, how about the solution?
Start by recognizing the problem, make rebuilding trust a paramount priority and begin to put specific strategies in place to repair your relationship with clients.
In many cases, rebuilding trust starts by acknowledging some level of responsibility.
It’s not just financial advisors who have taken a hit in their trust level. A poll of Americans taken early this showed trust in corporations at 38%, down 20% from a year ago and at the lowest level on record, well below where it stood in the post-Enron era. In recent articles in Fortune Magazine, Indra Nooyi of Pepsico and Jamie Dimon of JP Morgan Chase talked about how business needs to rebuild trust.
Dimon also addressed the issue of taking responsibility. He wrote: “In order to address the public anger and outrage over what has happened to our financial system, we in the banking community need to take some responsibility. Banks, including ours, should acknowledge that we made some mistakes.”
In interviews with investors, one of the biggest irritants is the failure of their advisors to admit any fault or take any responsibility for the meltdown of their portfolios. In some cases, all that investors are looking for is their advisor to say they’re sorry.
Here’s how one conversation might go:
“First and foremost, I’m truly sorry that I was unable to anticipate the events of the past year. I would have dearly loved to have been able to shelter you from the market downturn – unfortunately, these took just about everyone by surprise, me included. What I would like to talk about is what we’ve learned from this and how these lessons are shaping the recommendations I’m making going forward.”
Four drivers of trust
One of the top names and researchers around the issue of how to build trust is a U.S. based consultant named Charles Green.
He’s created a trust building formula that advisors can apply that has four elements – Trust equals C plus R plus I divided by S.
The first three drivers of trust are above the line, or the numerator if you remember your high school algebra. They’re Credibility, Reliability and Intimacy.
Remember, there are two elements of trust – trust in your capability and trust in your integrity.
Credibility addresses the first issue. How much do clients trust your competence and how believable you are in terms of the advice you’re providing? Are you seen to have real expertise? Does your track record build your credibility? Do you instill confidence in clients that you are providing the best possible advice?
Even where clients have been comfortable on this dimension in the past, their confidence in your ability to provide good advice has been shaken and needs to be rebuilt.
Reliability basically speaks to whether you do what you say you’re going to and deliver on your commitments. That can be little things – if you say you’re going to call, do you call? Or it can be big things – if you tell a client that their maximum downside risk in a 12 month period is 20%, does the portfolio you construct deliver on that?
The third factor above the line is intimacy. Do you engage the client at a deep, personal level? Do you ask questions that tap into their emotions and feelings? Do they feel that you are really listening to their answers – and is your relationship with them such that they feel comfortable sharing those with you?
These first three elements in the trust equation make up the total above the line.
The most important driver of trust
The last factor is the number below the line – and is as important as the first three combined. That below the line element is perceived self-orientation, in other words to what extent are clients concerned that you may be putting their interests behind yours?
There are a number of things that you can do to address this.
Do you appear to be really interested in what clients have to say? Do you ever seem to be in a hurry – is there any point where you demonstrate impatience and the desire to move things along? Do you really seem to be listening to them? (There’s that listening word again.)
Do you contact them with ideas and advice even when there is no revenue entailed for you? Whether it be on a personal or business matter, if every conversation has something in it for you, clients may be legitimately unsure about what drives those calls.
And something that’s especially problematic these days, are clients absolutely comfortable that your recommendations are not skewed by the compensation that results?
Recently, there has been extensive media coverage about how advisors’ recommendations may be motivated by their interests rather than clients. Short of doing something for free, compensation is always an issue. Even when dealing with accountants and lawyers, some consumers wonder whether all the time they were billed for was necessary or actually spent.
Compensation is particularly a problem in the financial industry, however, where it is typically commission based, embedded in management fees or billed as a percentage of an account. Even when the fees are transparent, clients sometimes wonder whether they are getting good value.
There is no perfect solution on compensation, other than being upfront and transparent – here’s what I charge, here’s why and here’s what you get for it. As well, some advisors need to be more open about discussing available alternatives on how clients can pay for the advice they receive.
What’s your trust quotient?
Rebuilding trust will not happen quickly or easily – and it’s tempting to put it off as a result. Given it’s critical importance, however advisors who don’t give reestablishing trust priority do so at their peril. Now’s the time and today’s the day to being the critical task of repairing client trust.
For advisors who want to learn more, a twenty question diagnostic online questionnaire can be completed at no cost at Charles Green’s website. You’ll receive a short report that highlights potential weak spots and makes recommendations.
Go to http://www.trustedadvisor.com/ and click on What’s your TQ rating?
 Email This Post
|
 Print This Post
|
