Financial advisors have a perennial trust problem. And it isn’t getting any better. According to a new survey published by wealth management firm Personal Capital, 32 percent of U.S. adults believe financial advisors are likely to take advantage of them. What’s more, 70 percent of the 2,178 American consumers surveyed said recent financial-industry news has given them second thoughts about trusting anyone with their money.
So great is their mistrust that 45 percent of the slightly over half of consumers who lack an advisor said the reason why was lack of trust.
What’s more, had the consumers surveyed known more about how the industry works, their mistrust may have been even higher. Case in point: nearly half of those surveyed (46 percent) believed financial advisors are required to serve their best interests by adhering to a fiduciary standard of care. Had they understood that a substantial number of advisors operate under the less stringent suitability standard, their mistrust would likely have been even greater.
Now, it’s understandable that so many consumers mistrust financial firms and professionals. After all, they constantly read and hear about financial institutions such as Well Fargo engaging in organized fraud. Plus, the drumbeat of individual advisors who victimize their clients through Ponzi schemes and other scams continues apace. It’s a wonder that greater numbers of Americans aren’t even more distrustful of financial advisors.
Still, there’s good news. As with many such surveys, consumers who have their own financial advisors generally feel good about them. According to Personal Capital, just under half of Americans (46 percent) say they work with an advisor and that 89 percent say they trust their advisor to act in their best interests.
But we’re still left with this fact: just under half of Americans without an advisor attribute this to lack of trust. Think about that for a second. This is a tremendous negative drag on industry growth, which suggests advisors must do more to win over doubting consumers, both before and after the sale. And now that the Trump Administration is likely to water down the DOL Fiduciary Rule, advisors will not benefit from a mandated industry-wide movement toward fiduciary duty.
Accordingly, if you’re looking to build trust under your own steam, here are some pointers to consider:
- Increase the amount of information you share during the sales process. Make sure prospects know a great deal about your educational background, industry experience, and current standard of care. If you operate as a fiduciary, make that a centerpiece of your sales effort.
- Engage in a 100 percent above-board fact-driven selling style. Avoid misrepresenting the products you sell or engaging in high-pressure sales tactics or fear-based appeals. Let truth be your guide in every stage of the sales cycle.
- Use a two-interview sales approach so you have enough time to do comprehensive fact-finding. The more you understand about a prospect’s needs and concerns, the more meaningful your recommendations will be, thereby building more trust.
- Once a prospect becomes a client, strive to remain in contact. Conduct account reviews at least annually and between reviews, make yourself available to answer questions and respond to service requests. The more contacts you have with your clients, the more trustworthy you’ll become.
- Finally, try to anticipate and prevent client complaints. If one arises, respond immediately to uncover what went wrong and to make things right. With any luck, the good will you’ve established over the years will allow you to resolve matters amicably . . . and out of court.
In addition to producing higher sales and customer retention, becoming a trusted advisor also means you won’t have to use your E&O insurance as much . . . or ever! Trust us—that is a very good thing!
For information on affordable E&O insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit EOforLess.com. For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.