It’s Time to Start Building Trust Again…But How?
Bernard Madoff. That name alone is enough to trigger feelings of betrayal, resentment, hatred and deception. While you surely did nothing wrong, unfortunately Mr. Madoff’s reputation has extended to you and your client’s level of trust for you has likely deteriorated.
In fact, Prince & Associates, found that 15% of the wealthy had left their main advisor last year and 70% had pulled some of their money away. Furthermore, a survey of “rich Americans” by the Harrison Group found that 63% had lost faith in financial institutions.
These statistics are in the past, so let’s turn to solutions in order to gain back the trust of the investing community.
Many have suggested that a transparent fee approach is key in the reestablishment of trust.
However, I believe that transparent fees are only one part of the solution. The underlying mechanisms of the solution must lie in customer education. Customer education not only means transparent fees, but also education of the products, strategies and risk-reward tradeoffs.
A new kind of relationship between the client and the advisor in which the client actively participates in the decision-making process and understands the implications of various portfolio decisions.
We know that now is not the time to significantly increase expenses on consumer education initiatives. However, inexpensive tactics like email newsletters, regular blog posts or personalized educational presentations are sure to impress clients, build loyalty and educate all at the same time.
Investors will not quickly forget the deceit. Furthermore, you cannot control the actions of the other advisors, who believe that cheaters prosper or that they can “beat the system”. However, what you can control is the financial knowledge of your clients. Those educated clients will understand the soundness of your advice, regardless of the mistakes of others and regardless of the natural fluctuations in the markets.
Tags: Financial Advisor, Financial Crisis, Investor Education
