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This article appears in the February 2020 issue of Advisor’s Edge magazine. Subscribe to the print edition or read the articles online.

This year’s Edelman Trust Barometer, the global survey of citizens’ faith in institutions, described a “trust paradox.” Despite strong economic performance and nearly full employment, trust in institutions is sagging.

You may see parallels in the advisory profession. A decade-long bull run has enriched clients, and there’s a lot of good news to share regarding 2019 returns. Yet, the democratization of financial information and a relentless emphasis on fees have impacted client relationships. Online brokerage ads depict advisors as smug, self-interested creeps.

The Edelman report says waning trust is widespread. No institution — business, government, non-governmental organizations nor the media — is seen as both competent and ethical. This helps to explain the “stagnating trust in the face of strong economic performance.” Competence is no longer enough.

Edelman tweaked its model for the first time in 20 years to dig into the dimensions of competence and ethical behaviour. Competence accounts for just under one-quarter of a company’s trust capital, the report found, whereas ethical attributes account for the rest. Of those attributes, fairness is the most important.

The “ethics shortfall” may occur partly because companies have emphasized competence and performance over their commitment to ethics and integrity. This has happened despite changing societal expectations.

“Consumers expect the brands they buy to reflect their values and beliefs, employees want their jobs to give them a sense of purpose, and investors are increasingly focused on sustainability and other ethical commitments as a sign of a company’s long-term operational health and success,” the report said.

The CFA Institute’s 2018 investor trust survey (its most recent) acknowledged a split similar to Edelman’s barometer when it came to building trust. Investment performance, a potential measure of advisor competence, can’t be guaranteed, then-president and CEO Paul Smith wrote, but “the other actions essential to building trust are very much within the industry’s control.”

The CFA report’s equation for trust combines credibility (track record, experience and credentials) and professionalism (competence, knowledge, empathy, putting clients first). Steps advisors can take to improve professionalism include better transparency on fees, conflicts and information security; demonstrating a dedication to the values clients hold dear; and showing clients that you’re continuing to learn and develop as a professional.

An obvious starting point, as clients receive their annual fee statements, is to build trust by being radically transparent about what you’re charging. Trying to ignore fees, or obfuscating with jargon, will lead clients to assume the worst — and further expose the industry to the caricatures on TV.

Another way to demonstrate professionalism is to tell clients about something you learned at a conference, or a speaker you saw who might interest them. If you’re pursuing a new level of certification, let clients know and explain why it’s important to your practice. This will demonstrate that you’re invested in your career and in providing the best service.

Another way to increase transparency and trust is through technology. Online portals that provide easy access to portfolios give clients a sense of control over their investments. Rather than worrying about what they can’t see, or stressing over excessively complex documents, a user-friendly interface can build trust. The CFA report found a “strong link” between advisors’ use of technology and client trust, especially among younger investors.

The Edelman barometer pointed to another significant shift. Despite the “pervasive” lack of trust in societal leaders — religious and government leaders, as well as the very wealthy — trust in fellow citizens and community members is strong.

“These findings are emblematic of one of the major trends of the past two decades: the shift from top-down to horizontal influence,” the report said.

In the past, advisors may have been tempted to play gatekeeper, holding the keys to investment information as well as the means to trade. That’s no longer tenable for obvious reasons. Clients are coming in loaded with information, and do-it-yourself investing options are cheap and easy to use. The Edelman report shows there’s less and less room for a hierarchical advisory relationship.

Adjusting your practice to be more transparent and your client relationships to be less top-down will align with today’s more complicated version of trust. It will also make the profession less vulnerable to the unsavoury depictions that further erode clients’ faith.

Mark Burgess is managing editor of Advisor’s Edge. Email him at