Finances have, and will for the foreseeable future, be a challenging topic of discussion and management, for a significant number of Americans. Several studies, including the American Psychological Associations’ Stress in America Survey demonstrates that many Americans experience stress related to finances, especially Generations X, Y, and Z. This financial stress, paired with minimal financial education and literacy, results in poor money management and decision-making, leading to further distress.
Knowing this, one could make the healthy assumption that most individuals would seek the expertise of a financial advisor. However, only 35% to 38% of Americans say they would consult a financial advisor. Over 30% of those polled in the 2017 Personal Capital Financial Trust Report believe that a financial advisor will take advantage of them; and of those who elect not to work with a financial advisor, 45% cited lack of trust as the primary reason.
Financial advisors, especially fee-only advisors, may have a better reputation amongst consumers. However, they are likely to be unfairly categorized with other financial professionals and institutions. Therefore, they must still work to gain potential clients’ trust.
To do so, financial advisors must build their credibility. Membership in an organization, such as XYPN, with a clear mission and values set is an important start. The next step is building personal credibility as financial planners tend to be their own “brand.”
Stephen Covey who authored the book, The Speed of Trust, identified four core aspects of credibility. Those with high credibility can answer the following questions in the affirmative:
Once credibility is established, the next step is to engage in high trust behaviors. In Stephen Covey’s The Speed of Trust, 13 behaviors of high trust individuals are outlined. While several of these behaviors overlap with developing credibility, the following that stand out:
Financial advisors must not only work to gain trust, they must also maintain and/or increase trust in their client relationships. Incorporating concepts of financial coaching, or working with a financial coach, can be a great way to enhance trust, understanding of the client, and information-sharing in the client-advisor relationship. Additionally, this can lead to more efficient communication and execution of financial advice and plans. The following provides an example of how financial coaching concepts can be built into the financial planning process.
Finally, developing trust requires a deep level of self-awareness, and raising awareness of our own biases is an important part of that self-discovery. Additionally, awareness of our biases can limit breakdowns in trust. Implicit biases can easily creep in and interfere with the goal of working toward client’s best interest. Being proactive in identifying and making appropriate steps to limit our biases will reduce assumptions about clients, ensure clients feel heard, and help financial advisors to make recommendations based on the client’s values and best interests as opposed to advisors’ biases.
It is important to note that everyone has biases. They are unconscious and often without intention. These biases do not always align with your stated beliefs. For example, you can believe in religious freedom and have a negative perception or bias against a specific religion or faith group. Implicit bias has real-world effects and have been demonstrated to impact everything from employment to medical decisions.
The good news is that they are changeable. With effort, we can replace our biases with new thoughts. To do so, we must first become aware of the biases we hold. Harvard’s Project Implicit allows individuals to find out their biases about a variety of categories, including race, weight, disability, and more.
Once aware of your biases, try to spend some time engaged with members of that group and simply listen to their lived experiences. Additionally, consider the power distance in your relationship with your clients. You are the expert in an area that causes them significant stress and anxiety. To balance that power and limit the effects of bias, learn about their histories and values (as suggested in the integrating financial coaching section above) and utilize their language.
Finally, consider the commonalities amongst yourself and the group(s) you may have some negative bias toward. Try to hold onto those shared characteristics while also embracing the differences. The most important aspect of reducing bias is being motivated to do so.
When clients come to financial advisors, they are requesting your expertise, your guidance, and your commitment. Whether they say it directly or not, they are letting go of some control and trusting the financial advisor to prioritize their best interests.
How you initially gain, continue to nurture, and ultimately maintain that trust is an individual, yet somewhat universal, process. Starting with these core steps of building credibility, engaging in high trust behaviors, integrating financial coaching concepts, and increasing awareness of ones’ own biases provides a solid foundation of trust and improves client-advisor relationships.