People want to do business with people they trust. The 2008 financial crisis left the industry with a black eye, and for good reason. Unfortunately, not much has changed in the past eight years as most financial services firms continue to place short-term profits ahead of long-term customer needs. Individual investors have valid reasons to be wary of financial advisors, but there is good news. It’s easier than advisors might think to build trust with existing and potential clients. While in any relationship, trust takes time and is built in incremental steps, the following are 10 questions you should be prepared to answer should they arise:
- Is your house in order? Registrations up to date? Is your ADV, if applicable, easily accessible?
- Are you prepared to talk about your personal values and how they align or perhaps differ from your client’s?
- Do you take the time to ask the “right” questions? Do you listen to the client’s investment objectives and implement an aligned plan? Have you included the client’s spouse in the conversation?
- Is your investment advice objective and independent? Are you constrained by the financial products you can sell, and are you willing to disclose that to your clients? Over-using or over-promoting in-house funds is good for the firm but is usually not in the client’s best interests.
- Are you completely transparent about fees? A trustworthy financial advisor should not sell products with hidden fees. It’s the investor’s right to know how their money is being spent.
- Do you have references who will speak to your character and competence? Ask your clients if they will vouch for you and voluntarily provide references to prospective clients.
- Do you have a solid track record of returns? Are you willing to admit mistakes? Nobody expects perfection. You may be surprised by how willing your clients are to extend the benefit of the doubt to an advisor who is transparent and honest.
- How often do you communicate with your clients? What form of communication do you use? Do you listen or talk more? Lack of communication is one of the leading reasons why investors seek new advisors. So is unwillingness to listen.
- Do you provide a satisfactory level of transparency with your client’s money? In this day and age of online financial services, clients should be able to see their accounts and access funds at their discretion, not yours.
- Where do you park your ego? Make sure it’s at the door and that you place your client’s best interests before your own personal and professional needs.
As in any industry, trust is built by being trust “worthy.” This is accomplished simply with the right combination of character, competence and consistency, and all three are required when working with clients as a financial advisor. Bernie Madoff may have had the technical competence but he was certainly devoid of character. How about you?