Many financial advisors would like to say that what makes them better is that they have lower fees and higher investment performance. The problem is, not only is that not true in most cases, that’s not what clients care about. When you think about your most satisfied client, ask yourself why they’re happy with your firm. One word will likely come to mind: trust.
Trust is paramount in any relationship. But when you’re dealing with someone’s money it goes without saying that trust needs to be at the top of the priority list. While the relational investment required to build trust takes time and energy, it’s arguable that trust is more important than service or performance when it comes to client satisfaction. Need proof? Here are just a few ways trust can take your advisory practice to the next level.
Trust Can Maintain A High Retention Rate
Vanguard’s 2017 report on trust and financial advice gives us a sneak peek into how much of a role trust plays in client loyalty. Of the clients who reported a high level of trust in their advisors, only 2% said they were likely to think about switching advisors. And if you genuinely make trust a priority, there is a direct correlation between retention and loyalty. Of investors who have only been with their advisors for a year or less, 65% reported high trust. That may seem like a decent number, but compare it to the 89% who reported high levels of trust and have been with their advisors for 15 years or more.
Trust Allows Advisors To Win More Business From Referrals
Referrals are essential to growing your business, but they won’t come fast and furious unless your current clients trust you. In the Vanguard report mentioned above, a staggering 94% of investors said they are more likely to make a referral if they trusted their advisor, and that number becomes even more significant when you learn than half of the people surveyed said they found their advisor through a referral. If you want to easily generate referrals, invest in your current client relationships and they will become your advocate to their family and friends.
Trust Can Increase Client Transparency
A little attention goes a long way and doing more listening than talking will do wonders for your client’s trust in you. Believe it or not, clients report more investor satisfaction from personal attention than from financial returns, and 44% say that not getting enough personal or portfolio attention played a role in broken trust with their advisor. If a client isn’t confident that they are being heard, they won’t feel comfortable revealing all the details you need to do your job well and deliver on your objectives. Your client isn’t just trusting you with their money, they are trusting you with their goals, dreams, and details of their life, and they will only be transparent about this information if they know you value them.
Trust Keeps Channels Of Communication Open
You and your client will be feeding each other plenty of information as your relationship progresses. All it takes is one unreturned phone call or email for your client to start disregarding what you tell them. By establishing a firm foundation of trust, your client will see value in the content you provide them with, whether through emails, newsletters, or in your meetings. A CFA Institute study on investor trust tells us that one of the main reasons investors leave their advisors is lack of communication or responsiveness. Trust keeps these channels of communication open on both sides.
Trust Helps Your Firm Stand Out From Other Advisors
You know there’s a lot of competition in your field. How do you make yourself stand out when it feels like you are all doing the same thing? Considering the sad statistic that only 44% of investors trust financial services, you have a golden opportunity to be original and set yourself apart from the crowd. In their trust research, The CFA Institute’s respondents chose trustworthiness over investment performance as their number one reason for choosing an advisor. If you want prospective clients to notice you amongst all the noise, be open and transparent, refer you to others, and stay loyal to you, build a reputation of trust.