Rick Telberg

The Three Essential Elements for Client Trust

Clients tell investment advisors what it takes to gain their confidence.

October 18, 2007
by Rick Telberg

If you’re a personal financial planner, you know how it feels. You put on your best navy blue suit. You shine your shoes to the luminosity of black diamonds. You comb your hair like a kid on his way to Sunday school. You walk into your new clients’ living room, and you see it in their eyes: How is this guy going to steal my money?

This phenomenon is revealed in a study from State Street Global Advisors and Knowledge@Wharton, which asks clients to name the most important characteristics of their investment advisors.

The most important characteristic wasn’t low cost, which was an issue to just 12 percent of respondents. Nor was it investment performance, which was important to only 10 percent of respondents. It wasn’t “understanding family needs and goals,” which touched just 20 percent.

It was “trustworthiness” by far, mentioned by 69 percent.

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Even if you think that’s kind of obvious, and agree that a CPA is already the most trusted “trusted advisor,” you might not recognize the ways in which clients need to feel trust.

Your honesty, your ethical standard, is, of course, an important area of trust. Clients may have a lot of questions they never ask: “Can you steal my savings?” “Do you have a financial interest in what you’re selling?” “Are you going to whop me with an outrageous fee?”

Your best defense? Candor. First, address those issues without them being asked. Emphasize your reputation and that of your firm. Be open about any fees or commissions you’re collecting behind the scene. Discuss your personal ethical standards and the rigorous standards of the profession and the AICPA. Make every effort to be sure the client understands what your services will cost. Don’t confuse them with too much information or too many contingencies.

Second, your competence is an equally important area of trust. Clients are worried not only that you’re going to steal their money, but that you’re going to bungle it too.

Frankly, they have reason to worry. How many financial advisors dumped their clients’ savings into Enron and WorldCom? I hate to think.

Your next best defense? Again, emphasize your reputation and that of your firm. Explain your qualifications and certifications. Tell the client about the research you do before you make investment decisions. Gain an understanding of how much risk the client will accept. Prove that you’re more competent than they are.

The third kind of trust is less recognized and harder to define. It’s an interpersonal trust, the kind that lets clients tell you about their family issues, health problems, their kids and the eternal tug-of-war between fears and dreams.

When they tell you these things — and they should, to the extent that it matters to financial planning — they need to know that you aren’t going to discuss it with others. That you aren’t going to snicker. That you aren’t going to tell them they’re wrong or advise them to get a divorce or a new job or a better shrink.

Not that you’d do any of those things. But the client has to know you wouldn’t.

To foster this trust, you need to let your clients know that you respect their personal and family issues. When they mention something personal, be sure they understand how you will consider that issue in your planning decisions. Bear in mind that if clients mention something personal, it’s obviously important to them.

Trust is fragile. It doesn’t take much to break it. It’s also valuable. Your work depends on it. If you treat it with all due care, you’ll have laid the foundation for a solid and productive relationship.

Candor. Competence. Caring. We call this “The Three Cs of Client Confidence.”

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COMMENTS: Questions, rants or raves? Write Rick Telberg.

Copyright © 2007 Bay Street Group LLC. All Rights Reserved. Used by Permission.

About Rick Telberg

Rick Telberg is editor at large/director of online content.

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Disclaimer: Any views expressed in this article do not necessarily reflect the views of the AICPA or CPA2Biz. Official AICPA positions are determined through certain specific committee procedures, due process and deliberation.