Building trust means being an advocate for your clients

Yesterday I heard about a report that Vanguard put out last year, focusing on what determines trust in an advice relationship. They surveyed 3400 advised clients (in the US but the findings can be applied here I think) and found that the key factors could be grouped into three areas: Functional, Emotional and Ethical.

Emotional factors account for 53% of the overall trust that the consumer has, Ethical factors 30% and Functional factors only 17%.

The top two individual factors are ‘is my advocate, pursuing my goals almost as if they were his/her own’ at 17% and ‘Will act in my best interest at all times’ at 15%. Makes sense really.

What was a bit astounding was that the following had no impact on trust at all! ‘Is accessible’ (so no need to be taking calls from clients at all hours of the day and night!), ‘goes above and beyond to make me feel like a valued client’ (birthday cards are a waste of money) and ‘follows up when expected and without prompting’ (my suspicion here is that this is just a ticket to the game, rather than something that increases trust).

So, what will help with all this? I believe there are a few ideas worth considering. 

First, let’s talk advocacy. How can you demonstrate to your clients that you are pursuing their goals almost as if they are your own? While this is pointing out the obvious, this issue does require that you and your clients are clear about their goals. Given that most clients walk in the door with no idea what their ‘goals’ are, this can be a bit tricky! However it does show that taking the time to work out what those goals are will go a long way to solidifying your relationship with your clients. And keep it simple. A list of 14 goals is completely unworkable – between three and five is a sensible number. Make sure these are recorded clearly somewhere and can be referred back to both you and your clients every time you touch base.

Secondly, the pursuit of those goals. How can you demonstrate that you are actively working towards those goals for your clients? Personally, I think regular personalised communication is the only way to go here. Easier said than done I know but we are talking about the issue that most impacts the level of trust that your clients have in you.

As for ‘will act my best interest at all times’, frankly, I’m not entirely sure how you can demonstrate this. ASIC’s requirement that the client ends up better for the advice than they would have been without it seems a very low bar, even if it’s not being met uniformly across the industry today. I’d be interested to hear what you think can be done to demonstrate best interest, especially in the ongoing interactions that you have with your clients, not just SOAs.

The Vanguard report also considered what can denigrate trust. While the research is a bit light on, it does say that about a quarter of clients have had something happen that has damaged the trust that they had in their adviser. Issues such as ‘caused my portfolio to underperform’, ‘did not pay enough attention to me or my portfolio’, ‘steered me towards poor investment choices given my risk tolerance and goals’. It’s interesting that these are all so investment focused. I do wonder if better discussions up front would have avoided a whole lot of these issues down the track!

If you’re interested, you can read the full report here.