A financial advisory relationship has three types of trust. According to Vanguard’s Center for Investor Research’s 2017 report, “Trust and Financial Advice,” those three types are functional trust, emotional trust and ethical trust.
According to the research, in order to really trust you, clients must trust you in all three areas. Here’s what they are and how you can build trust in each area:
This is the confidence clients have in your credentials and technical skills.
How to build: Get credentials and certifications in the areas in which you specialize and are interested in. Stay up-to-date with the latest news and legislation that might impact your clients and be proactive in communicating how these might impact them. Present your certifications and qualifications so clients know which ones you have.
This is the element in the relationship that makes clients feel positive about you.
How to build: Identify areas where you can help your clients feel a sense of relief or be their advocate. Genuinely ask how they are doing, about their family members and remember what they’ve told you. Be proactive in frequently communicating with them about both positive and negative things.
This is whether your behaviors are consistent with “correct conduct,” according to Vanguard.
“Ethical trust is like a sixth sense— clients usually know when something doesn’t feel right,” Billy Lanter, fiduciary investment adviser at Unified Trust Co. in Lexington, Kentucky said in the October 2019 Investopedia article “Trust: An Adviser’s Most Important Asset.”
How to build: Be transparent about what you charge and why. Be open and willing to answer any of the client’s questions about compensation. Remove conflicts of interest and always act in the client’s best interest.
Build all three types of trust by forging an authentic relationship with your clients where you know and understand what they need.
“The superior experience clients are willing to pay for is a personal relationship with an adviser who not only understands their goals but is managing their portfolio in accordance with those goals,” Lanter told Investopedia.
Ana Trujillo Limón is senior editor of the Journal of Financial Planning and the FPA Next Generation Planner. She also edits the FPA Practice Management Blog. Email her at firstname.lastname@example.org, or connect with her on LinkedIn.