Updated Wednesday, April 23, 2014 as of 3:43 PM ET
Blogs - A Better Practice
How to Build Credibility With a Capital Markets Perspective
Wednesday, March 27, 2013
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After nearly three decades of benign capital-markets behavior, the last five years have been much more challenging for investors and for advisors. Our industry is still sorting out the implications of the assumptions we made about the markets prior to 2007: “There was no intellectual justification for assuming that the market movements from 1980 to 2005 were the best predictor of market movements after 2005.”

Unfortunately, almost from top to bottom, our industry built a set of optimistic assumptions and then based important decisions on them.

Investors are living through a crisis of confidence, which has led to a concurrent “crisis of credibility” for advisors. Since 2007, clients with “properly diversified portfolios” have experienced losses of 20%, 30% and even 40%. Iconic firms were forced to merge impulsively, others have ceased to exist, and all of them continue to struggle with declining margins, downsizing and maintaining profitability. While most financial advisors have maintained their important relationships, very few have escaped at least some concern from investors about the viability and value of their services.

Building (and rebuilding) credibility with clients and with potential referral advocates must be an ongoing commitment. As a coach to top advisors in our industry, I suggest that prudent FAs allocate significant time each month to proactively reaching out to existing clients and to “centers of influence” with a thoughtful message about the markets—where we’ve been, what’s currently going on and what is likely to happen next. I’m suggesting that your retention and new business acquisition goals be supported by a professional and well-articulated Capital Markets Perspective (CMP). 

Two Key Ingredients that Lead to Credibility

Your credibility will be supported by two ingredients of good communication that should be built into your message. First, it is important to provide adequate detail and high-quality information in your comments. Doing so allows you to demonstrate the depth and breadth of your knowledge. This is the essential foundation of professional credibility.

Second, it is vital that your client or the potential referral advocate gains insight from your message. An effective CMP creates a new or exciting understanding of the mechanisms of the markets. This knowledge, based on meaningful details, enhances the perception of credibility from investors and centers of influence: when you demonstrate that you know how the markets work and how to take advantage of opportunities within those markets, you are credible to those who are in a position to do business with you.

The Role of Illustrations

A common mistake made by many Financial Advisors is to use only verbal descriptions to present information. Of course, when you are working on the telephone, words are your only tool; however, the human mind is designed to receive and process information visually much more effectively than any other sense. When presenting complicated information about the mechanisms of the markets, it is more powerful to include graphics that illustrate market dynamics rather than using words alone to get the message across. The old saying “A picture is worth 1,000 words” is valuable guidance when presenting your ideas. Take the time to find 10 to 12 graphics that help you tell your story; there are plenty of resources developed every quarter from your asset management partners and your home office from which to choose.

The Structure of the Conversation: Seven Questions

In addition to the quality of information presented in your CMP, the structure of your message helps your audience achieve a deeper understanding. When you answer the following seven questions in the order presented and illustrate your answers with detailed graphics, your CMP will provide investors and other professionals with an experience of your professional credibility:

1. What is the current situation?

Start with some reflections on the current situation in the capital markets by using whatever key benchmarks you feel are the best indicators of what investors are currently experiencing. There are always one or two areas of the markets that deserve special attention because of developments or disruptions. Illustrate your comments with three or four graphics that visually depict how the market has been trending. This begins the conversation with reaching an agreement about what is true in the current markets. You want to start with the other person saying, “Yes, I’ve seen the same things recently!”

2. How did we get here?

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