Clients are mad as hell, and they're not going to take it anymore—unless the industry makes some changes. Speaking at the SIFMA Private Client Conference in Chicago recently, a chorus of executives including Stifel Chairman and CEO Ron Kruszewski, Merrill Lynch Wealth Management Head John Thiel and UBS Head of Wealth Management and Investment Solutions Robert Mulholland called for tougher industry standards.

Ron Kruszewski began his remarks with a clip of Peter Finch's famous monologue from the 1976 film Network. "I want you to get up right now and go to the window," Finch shouted. "Open it, and stick your head out and yell, 'I'm as mad as hell, and I'm not going to take this anymore!"

When the clip ended, Kruszewski said, "We need honest and straightforward dialogue to make sure that not only do our clients not look like the one in the video, but also that we don't lose a generation of investors who are paramount to our industry's success."

Regaining Client Trust
Mulholland had a message for professionals in the financial services industry: We are the adults in the room.

Mulholland remembered how, while working at a firm 30 years ago, the general counsel would chide employees with one saying: "No one's bottom line is more important than the reputation of the firm."

That mantra turned into a daily refrain from the general counsel and ultimately a cultural value that its employees shared as they worked for years, he said. Now 30 years later, that adage still holds true for the financial services industry today.

"We are the adults in the room," Mulholland said. "They are looking to us to lead by example."

In order to do that, financial advisors and other professionals need to ask themselves several questions, Mulholland said: Do we talk about integrity every day? Do we talk about making sure we do the right things? Do we talk about holding our clients' interests in front of ours?

"If we aren't having these discussions daily, we're not part of changing the perception of our industry," Mulholland said. And taking that kind of action is just as imperative for the wealth management industry's top leaders.

"It cascades down. You cascade the right behaviors or the wrong behaviors from top to bottom," Mulholland said.

Employees in the financial services industry have seen firms downsized, compensation cuts and jobs eliminated or moved offshore in the past 10 years. "Then we turn around and wonder why some of our employees took outsized risk," Mulholland said. "Perhaps some of the industry's problems were not caused by greed. Perhaps some of the problems were caused by fear. It was fear of failure or fear of losing your job."

Industry firms can combat the risks that its employees will behave similarly by making sure they are motivated by the right incentives and processes, and not by fear or retaliation. "Leaders define culture, culture defines organizations and culture is the best predictor of a company's future or an industry's future," Mulholland said.

As the products and services offered by firms have become more complex, he said, it has become even more necessary for firms to have the proper controls in place to make sure that issues do not crop up. Employees need to know that there are rules, that they are implemented consistently within the organization and that there are consequences for not following them. And the monitoring of those rules needs to happen in person, Mulholland said.

"We have to be there with them to actually look them in the eye," Mulholland explained. "Supervision and control is much better face to face, not from behind a desk, a phone or a home office."

Changing Client Conversations
Financial advisors need to change the dialogue they are having with clients in order to overcome the dramatic decline in public's trust in banks since the financial crisis, according to Thiel. "We got drunk on the performance of the bull market, with 12% a year every year in equities from 1982 to 2000," Thiel recalls. "But the world changed, and our dialogue, our approach, didn't. It needs to. We need to talk about what our clients' goals, concerns and priorities are and map absolute performance to that objective."

Thiel's challenge to the industry comes as the public's trust in banks has fallen 16% from 2008 to 2012, he said. A study from Gallup shows the public has lost confidence in every institution but one—the U.S. military.

For the financial services industry, there is an upside—the experience of having climbed back from past downturns, Thiel said, including the Depression, early 1970s, late 1980s and early 2000s. "We have been here before. We can fix this. We can repair our reputation," Thiel said.

And for financial advisors and those providing financial advice, there is another positive: People are increasingly looking to people they trust for advice instead of institutions.

Changing the dialogue that both advisors and wealth management executives have with clients can come by taking several steps, according to Thiel. The first priority should be removing all the jargon industry professionals use in their conversations with clients and instead using plain language.

"We feel compelled to take our clients through the kitchen, through the grocery store, build the house and then tell them what we can do for them," Thiel said. "And they only want to hear, 'Can I retire? Do I have enough money? Can my child go to Harvard?'"

Next, advisors need to emphasize benchmarks versus goals. Conversations with clients should not emphasize the performance of the S&P 500, but instead should measure how close they are coming to their personal goals, including preserving their lifestyle, giving back through philanthropy and passing their wealth on to their children.

Thiel also called for advisors to embrace clients' emotions rather than avoiding them. "Put it in context, see how it changes with volatility and other things that happen in the world, but let's not ignore it," Thiel said.

And finally, advisors also need to keep clients' entire situation in mind, in a step Thiel called asset allocation versus resource allocation. That means acknowledging everything that clients may be going through and anticipating their needs.

"It could be illness. It could be a family event. It could have nothing to do with the markets," Thiel said. "We have to look at our clients and all of the resources they have."

Restoring Firms' Brand Names
Wealth management divisions have their share of "rogue brokers," Kruszewski acknowledged, but the real issue they must deal with is how the culture of the firm as a whole is not centered around image. Investors may have positive relationships with their advisors, but trust in firms has declined over the past decade, he said. "I'm going tell you today that you as a group need to demand that your firms change so you don't have to deal with your clients with the issues that occur in the firm," he said.

Kruszewski also called for a change in focus among regulators, citing a proposal that advisors disclose retention packages to clients as an issue that has received too much attention. "I'm virtually certain that the relationships that the clients think they have with you or the retention bonuses paid to firms have zero to do with the financial crisis and zero to do with the erosion of public trust and confidence," he said. "Yet what are we talking about today? We're talking about whether a broker should disclose pay when he moves."

Trust and confidence begin with a change in the culture of the firm, he said, which advisors are responsible for demanding and upholding. "Recognize what caused these issues that I spoke about previously, that those issues start with the right culture," he said. "The firms need to improve their image, and hence improve trust and confidence, and I think we'll all have a great next decade."