Co-author of The Trusted Advisor Fieldbook and a speaker and seminar leader who works with the investment community on building and repairing client trust, Andrea Howe understands that trust is perhaps the most critical component of the client-financial advisor relationship. Here, she talks about why it doesn’t matter how well a portfolio performs, if a client doubts your sincerity or questions your true intentions.

OWS: Why is trust such an important element in the relationship between clients and their financial advisors?

Howe: Clients are in a very vulnerable position with their financial advisors, so trust is essential; it’s absolutely paramount.

I can think of few business relationships that are as personal. It’s an odd dynamic, because it’s cast in a business setting and yet it’s supremely personal. I don’t think of the relationship with my doctor or clergy person as a business relationship; they’re clearly personal relationships.

However, the kinds of conversations that a financial advisor has to have in order to be effective are as deeply personal as those about physical health, religion or spirituality.

That’s part of why trust is so critical. Clients must feel comfortable sharing deeply personal information. They’ve got to open up, be able to hear tough messages and feel comfortable reaching out and being proactive.

And advisors need to see their jobs not as simply making transactions at the right time, but attending to the relationship with the client, so he or she has confidence in the advisor’s actions.

What happens if a client’s trust in an advisor is shattered by an oversight or error, or it erodes over time?

We tend to think trust is fragile, but it’s not that delicate. If trust is broken easily, the client probably didn’t have a lot of it in the first place.

The worst scenario is the relationship in which trust erodes over time and the relationship becomes merely cordial and transactional. More fundamentally it’s become strained and distant, with neither party still confident in the relationship.

It’s stressful and doesn’t add much value for anyone.

If trust is shattered, there is no relationship, and sometimes the best thing a financial advisor or a client can do is end it. The advisor can approach his or her client and say, “I’m not what you need. I don’t believe I’m the right person for you right now. Let’s talk about how to best get you what you need.”

Paradoxically, doing this actually restores the

relationship.

Sometimes, the trust isn’t completely shattered, but a financial advisor’s actions have left seeds of doubt in a client’s mind. There are many financial advisors who don’t do anything wrong per se; they have the best of intentions, but they don’t realize that they have a blind spot when it comes to how their actions impact their clients.

We’re all human, we all make mistakes; we all do things with good intentions but they don’t always have the right impact.

Is it possible for a financial advisor to regain a client’s trust?

Absolutely. It’s not only possible, but it’s critical, and addressing mistakes or mishaps can improve the client-advisor relationship Financial advisors who can sort out and resolve trust issues can see their relationships with clients deepen and grow stronger.

The conversations we’re most hesitant to have often inspire the most trust. But if the advisor is defensive and presumptuous, and does not acknowledge the issue or his or her role in the situation, the relationship will likely deteriorate further.

What steps should the financial advisor take to regain a client’s confidence?

The steps a financial advisor needs to take to regain a client’s trust are simple. First, the advisor must recognize and then take ownership of the issue.

Proactively approaching the client to say, “I’m sensing some tension” or “There’s something not right here” is critical. It’s easy to not pay attention or to think it’s not important, but it is. So raise the issue; it’s surprising how an advisor can dramatically turn around a situation by taking a risk. Acknowledge the tension or incident and be willing to have the difficult conversation.

Then, make an appointment to meet the client in person or, if a face-to-face meeting isn’t possible, arrange to talk by telephone. Avoid putting the message in an email or letter.

This is one of the most personal business relationships a person can have, and while it’s likely more comfortable for an advisor to communicate via email, that’s a mode of communication that also keeps clients at arm’s length. If an advisor meets with or calls a shaky client and says, “I owe you an apology. I have not been listening to you or servicing your account the way you want me to; I’ve been reacting in a defensive and dismissive way,” and explains that he or she wants to figure out what’s best for the client going forward—even if it’s moving the portfolio to another advisor—then the client might pause and pay attention.

How can financial advisors inspire and earn their clients’ trust?

In The Trusted Advisor Fieldbook, Charles Green and I outline what we call the Trust Equation. It breaks down the ways to increase trustworthiness by four variables: credibility, reliability, intimacy and other-orientation.

Intimacy and other-orientation are the emotionally/psychologically-oriented variables, and most advisors typically focus on credibility and reliability. They deliver quarterly messages, show clients what they know, update the accounts and perform typical money management tasks.

However, the advisor also has to build intimacy. As trust is eroded or shaken, an advisor can build intimacy with an acknowledgement, an apology, validation and empathetic listening.

An advisor also must demonstrate that above all else, he or she is focused on the client. If an advisor is just focused on credibility and reliability, the client sees the advisor’s self-orientation as high.

Strategies to improve other-orientation relate to both results and needs. Results are more concrete and easier to focus on.

To demonstrate other-orientation with clients, ask questions from a place of curiosity and do the right thing, even if it means losing business.

Most advisors admit they have lots of room for improvement in this area. They are taught to be salespeople. The most radically other-

oriented thing an advisor can do is be willing to refer the client elsewhere if it’s in the client’s best interest.

The paradox is that even though the advisor might lose the account or a commission, loyalty gets built with the client. In the short term, the client may move money elsewhere, but in the long term, he or she will never forget that act of service from the advisor.

What other techniques can financial advisors use to develop mutual trust and respect with their clients?

If you want to be successful as a financial advisor, you have to embrace the more emotional and psychological aspects of trust and trust-building in a relationship.

But you also have to remember to focus on your clients’ needs. Financial advisors have to consider if they’re truly focused on their clients’ needs, or if they’re focused on their own needs to look smart, be the client’s hero or be well liked.

Self-orientation is strongest when we fear looking bad, being rejected or losing business. But the successful advisors will have the ego strength to acknowledge their issues and move on.

 

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