Welcome to the Age of Mistrust . . . a time when people question the truth of what they read and doubt the integrity of those they meet. It’s an era in which skepticism has replaced faith and in which consumers are not surprised when a trusted advisor becomes a scoundrel. As you can imagine, doing business in this environment can be tough. But if you take steps to build and preserve trust, you can survive—and even thrive. This article will show you how.
But first it’s important to understand how we got to where we are today. Back in the 1950s, Americans trusted their institutions of government and business. When leaders spoke, people had no reason to doubt them. But along came Viet Nam, Watergate, the corporate ethics scandals of the 1990s, the second Iraq War, and the 2008 economic meltdown. Consumers who used to believe in politicians, corporate executives, and financial advisers lost faith in them.
Consumer trust took another blow during the 2016 U.S. presidential election, when, according to multiple U.S. intelligence agencies, Russia spread false content across social media in order to sow dissension and mistrust in America’s system of government. In the election’s aftermath, the term “fake news” arose to describe not only Russian efforts, but also those of anyone who made false claims for personal gain.
Which brings us to today and what Edelman, a global marketing communications firm, calls America’s trust crisis. According to Edelman’s Trust Barometer, trust among informed U.S., citizens fell dramatically from 64 in 2016 to 42 in 2017, a drop of 22 points. This made America the lowest of 28 countries surveyed. Edelman says its Trust Index reflects the average percentage of individuals who said they trust their government, political institutions, media, and non-governmental organizations (NGOs). Edelman also pointed to declining trust among the general population, which fell nine points to 43. This put the United States in the bottom quartile of the 28 countries surveyed.
Why such a dramatic drop in public trust? Edelman says it resulted from a staggering lack of faith in the U.S. government. According to its survey, people’s trust in government fell 14 points in one year—to 33 percent among the general population. It declined 30 points to 33 percent among citizens who are well informed. The other three institutions had trust drops of between 20 to 20 percent. CEO Richard Edelman, said the plunges represent “an unprecedented crisis of trust . . . (linked to a) lack of objective facts and rational discourse.”
In the financial-services industry, mistrust is also a lingering side effect of the fraudulent mortgage loan practices that sparked 2008’s global economic meltdown. Business practices and regulations that lead consumers to question advisor motives haven’t helped. For example, a recent CFA Institute survey revealed that only 35 percent of retail investors believed their advisors always put their interests ahead of their own. Another 49 percent said advisors usually did, while 16 percent said they sometimes, rarely, or never did. High levels of doubt are the product of complex compensation models and confusing regulations that leave consumers wondering whose side their advisors are really on.
Worse, 84 percent of investors said advisors needed to fully disclose their fees in order to be trustworthy. Yet only 48 percent of consumers said their advisor did so. Another trust gap occurred on the issue of conflicts of interest. The CFA survey found that 80 percent of consumers said they expected full conflict disclosure, but only 43 percent were getting it.
Further confounding trust, investment publications apparently have adopted the practice of publishing articles from “objective” journalists that are actually just advertisements in disguise. Case in point: the SEC recently charged 27 individuals and entities (Seeking Alpha, Forbes, The Street, Yahoo Finance, The Motley Fool, and more) for publishing bullish articles about biotech investments that were just advertisements. In effect, investment publications blatantly published “fake news” in order to flog stock sales, leaving consumers to question the integrity of many financial-news outlets.
And let’s not forget Bernie Madoff, who perpetrated the largest investment fraud in history, valued at $64.8 billion. When Madoff pleaded guilty to 11 federal felonies in 2009, receiving a 150-year prison sentence, he prompted millions of investors to wonder whether they could still trust their own advisors.
The point of this litany? That the trust deficit in financial services has been simmering for decades. Today, financial professionals may see growing mistrust play out in their businesses in the form of prospect resistance to granting appointments or clients not following recommendations. Are you facing these problems and if so, what should you do about it? The answer is clear: Work hard to make sure your published claims (words) and professionalism (actions) are beyond reproach. Let’s take a closer look at what this involves.
A published claim is anything you say online or offline, in any medium (website, brochure, podcast, archived webinar, etc.). Because of the Internet, you should consider such claims to be permanent. In other words, they will be accessible to your prospects and clients forever because of the archiving and search capability of the Web. This is a game-changer for two reasons. First, the Internet makes it easy for consumers to fact check your statements. If you make false claims, you will be exposed for lying. Second, your lies will be highly visible to millions of people, many of whom will feel compelled to share what they learned about you, which will compound the harm to your reputation.
To make sure your public claims are accurate, screen them to eliminate what advisor coach Matt Oechsli calls blatant lies, white lies, and lies of omission.
- A blatant lie is when you tell a prospect that an annuity does not have a surrender period when, in fact, it does. Or that a life insurance policy doesn’t charge interest for loans against cash values when, in fact, it does. If you would lie in order to make a sale, then nothing we say here will make a difference. However, be forewarned: if you do mislead your clients, you will run the risk of losing their trust forever. Plus, you may potentially spark client complaints, E&O insurance claims, and regulatory sanctions.
- A white lie is a minor false statement you make to avoid hurting someone’s feelings. For example, Oechsli tells the story of an advisor who didn’t invite a client to a wine-tasting event. When the client asked why, the advisor fibbed, saying he didn’t think the client liked wine. Oechsli says telling the truth would have been more appropriate. The advisor should have explained the event was for top-tier client clients only—and encouraged the customer to consolidate outside assets within the firm to qualify for future events. That would have been a win-win.
- A lie of omission is when you fail to disclose a material fact about a proposed investment or insurance product. An investment advisor who fails to mention a relevant fee is committing a lie of omission.
Since clients are on high alert due to the fake-news threat, Oechli warns that a single lie can demolish the trust you took years to establish. To prevent this, he advocates “truth checking” every element of your business, including . . .
- Your value proposition: Are you truly delivering the value you tout in your marketing literature and web site.
- Your team members: Do they actually have the expertise you claim they have and can you prove it?
- Your digital brand: Does your web and social media content link up to your value proposition, and are your statements truthful, verifiable, and consistent?
- Your office: Does it deliver on the value proposition your firm promotes across various communication channels?
The claims you make about your products and services are especially crucial, as are the statements you make about business or economic trends. Unlike people who are publishing fabricated articles on the Internet to generate clicks and revenue, you are legally prohibited from “making stuff up.” Here are some things you can do to avoid publishing falsehoods:
- Don’t make assertions without factual support. Always tell people where your cited statistics come from and provide a URL in case they wish to see for themselves.
- Seek out research and statistics from trustworthy sources such as government agencies, trade associations, and industry consulting firms. Don’t just quote from a random page you find on the Internet. Look for rigorous publications or studies, as evidenced by their having a list of references, a recent publication date, and, ideally, the approval of a peer-review board.
- Avoid quoting experts who lack robust credentials. Only tap financial experts with designations that require rigorous study such as the Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), the Chartered Financial Analyst (CFA), or with academic degrees that reflect substantial achievement (advanced degrees in finance, management, marketing, etc.).
- Have someone proofread your content before publication, not just for grammar and syntax, but also for accuracy and credibility.
Having bulletproof content is important. But so is having a website that reinforces your believability. According to Jack Waymire, founder of Paladin Research & Registry, one of the best ways to boost your credibility is to be highly transparent to your clients. That means factually describing every source of competence: schooling, industry work experience, professional designations, and association memberships. While doing this, don’t fall prey to the temptation of hyping or overstating your credentials. Just provide the facts and let people draw their own conclusions. The more you shamelessly tout yourself, the less credible you will seem.
According to Waymire, establishing your expertise is just the beginning. You also want to demonstrate your commitment to ethical business practices. He recommends taking the following steps:
- Provide a link to FINRA/BrokerCheck on your website (formerly an option; now a requirement).
- Fully describe your insurance/securities/investment advisor registrations and any legally required standards of care.
- Stress the availability of your ethics code for client review (or Form ADV for investment advisors) and your clean ethical record.
- Explicitly describe your compensation methods, including commissions and fees deducted from client accounts. Failing to disclose all fees is a serious transgression to be avoided at all costs.
Other things you can do on your website to promote credibility:
- Include full contact information, including your phone number, business and e-mail addresses, and, ideally, a contact form where prospects can submit questions.
- Provide multiple cues that your business is a going concern. This includes making sure your web content is fresh, has up-to-date copyright dates and event listings.
- Publish lengthy biographies of firm principals and staff, along with their photos. This is a great way to engage with prospects on a personal level so they have some basis upon which to initially make an emotional connection with you.
- State your market and functional niches as explicitly and prominently as possible. Don’t make people guess at what you and your team (if any) do for a living.
- Watch the quality of your content. In other words, make sure it’s written to a high professional standard (clear, accurate, grammatical). If you don’t do this already, consider assigning a staff member as official copy editor and proofreader or hire a sub-contractor to review all content before posting.
Once you’ve established your credibility, now you have to convince people you’re a professional. This goes way beyond just looking the part. It cuts to the core of how you discharge your duties and how you relate to your clients as a fellow human being. Experts say three characteristics are necessary before people will consider you to be a real pro: reliability, intimacy, and client orientation.
- Reliability refers to whether you fulfill the claims you made during the sales process. Did you actually provide the value you promised? Did you meet all your deadlines? Have the products you recommended performed for your clients as expected? If clients can answer “yes” to all of these questions, they will likely consider you to be a true professional.
- Intimacy refers to the distance—emotional, not physical—you maintain between yourself and your clients. If you share a lot of yourself with them and they feel comfortable reciprocating, then you have established an intimate client relationship. This will foster rapid trust building.
- Client orientation is essentially the fiduciary standard. You always want to align yourself with your clients’ needs, not your own, so they sense you have their best interests at heart. In other words, consider how you would treat your parents if they were clients of your firm. You’d always recommend the very best solution for them, right? Similarly, operating as a fiduciary will remove all doubt that you’re sitting on the same side of the table as your clients. Even if you’re not legally required to be a fiduciary, think about pushing the envelope of the suitability standard whenever possible. Your clients will appreciate your efforts to put their interests ahead of yours.
By focusing on the three factors above, not only will you enhance your client relationships and build trust, you will also build long-term good will. That means your clients will be more likely to give you a second chance if you put out “fake news” by mistake, not to mention remain your clients for many years to come.