Restoring trust and confidence

I am starting to feel reluctant about using the words “trust” and “confidence” because our industry bandies these words around often and carelessly. We realize that these two words represent the essence of our business, yet we seldom step back and examine their true meaning. I’d like to take this opportunity to revisit the fundamentals at the root of our client relationships and hopefully identify opportunities to restore them.

Trust is earned by your ability to keep promises.

My belief is that trust comes from our ability to make and keep our promises. Confidence, as a byproduct, is what comes from maintaining that trust. Together, these create a belief in our clients’ minds that we are the right advisor for the job. I believe that most advisors are on probation. We have created enough goodwill to maintain our relationship but not enough to feel secure. For better or worse, what you do over the next six months will create the so-called tipping point.

How do you earn trust? (Revisited)

Before I share with you some strategies to restore client trust and confidence, I want to revisit an earlier column I wrote called How do you earn trust? (If you have not read this column, I recommend you do so.) In this column, I discussed seven eight hot-button issues that were discovered through multiple client surveys. We identified this list of hot buttons by asking, “When working with a financial advisor, what is most important?”

Here is a thumbnail sketch of the answers we received, in order of importance:

1. Trust and integrity.

2. Communication.

3. Investment returns and choice.

4. Risk and uncertainty.

5. The advisor’s availability.

6. Paying too much tax; reducing the tax burden.

7. Cost and value.

I am currently conducting a follow-up survey to identify how these client issues have changed. I suspect that the new list will look different, but I firmly believe that trust and integrity will remain in the top spot, followed closely by communication. I also think number three and number four are interchangeable but that they will remain as important or more important to clients in the future.

The mantra “change because you need to” is now in effect!

If your goal in 2009 is to restore client trust and confidence or secure new, like-minded clients, you will be measured on your ability to “button down” button down these concerns. What are you going to do differently in 2009? I believe that what has transpired in our industry over the past six months will be formative for many advisors. Those who demonstrate an ability to meet these issues head on will move forward. The mantra “change because you need to” is now in effect!

Consistency, predictability and continuity.

To restore client trust and confidence, you need to develop a client experience that is consistent, predictable and continuous. Think of any great business — it has not maintained customer loyalty by being ad hoc, unpredictable and fragmented; your business is no different.

Assume responsibility.

Before you can move forward with clients, you need to take ownership of recent client disappointment.. If the past six months have derailed clients’ financial plans, be accountable. I am not suggesting for a second that it is your fault. However, you have been retained by your clients to provide stewardship; therefore, it is ultimately your responsibility to lead them safely out of this mess. A great example of good management like this was provided by Maple Leaf Foods. Its faulty products led to customer deaths, but company leaders immediately took ownership of the problem. The result? Maple Leaf Foods has resurrected itself because it didn’t pass the buck.

Lead with a governing philosophy.

A governing philosophy is a set of principles or a methodology you adhere to when managing client savings. I don’t care what your methodology is, but it is important that you can explain what it is, why it works over time and how you are going to deliver. Without a governing philosophy, many advisors take on the characteristics of their clients and make emotional decisions when investing. I usually cite the Warren Buffett quote: “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insight, or inside information. What’s needed is a sound intellectual framework for decisions and the ability to keep emotions from corroding that framework.” If I were a prospective client, I would want to know what intellectual framework you adhere to when making investment recommendations.

Regulate communication.

Communication is the second most prevalent hot button clients talk about in surveys. It is the key to maintaining conviction and belief. There are two parts to this — form and frequency. Whether communication is in the form of a meeting, phone call, e-mail, video blog, website postings or a seminar, your communication must be delivered in plain easy-to-understand language.

To manage frequency, I think it is vital to have client communication protocols: Give your clients a list of the different methods of communication you use so clients know what to expect and when to expect it, especially in uncertain times.

Conduct effective face-to-face reviews.

No matter what your professional orientation is, brokers, planners and life insurance agents alike need to conduct face-to-face reviews during difficult times. Professor Albert Mehrabian, a pioneer in the study of effective communication, conducted research that yielded results reinforcing the importance of this strategy.

Based on his research, Mehrabian established this classic statistic for the effectiveness of spoken communications:

• 7% of meaning is in the words that are spoken.

• 38% of meaning is paralinguistic (the way that the words are said).

• 55% of meaning is in facial expression.

These statistics suggest that 93% of effective communication is nonverbal. It is impossible for your clients to feel your conviction if they can’t see you.

Managing client concern, worry and conflict.

This is a subtle one. It is always difficult to manage a relationship that is rife with concern, worry and conflict. The absolute worst thing we can do is pretend that it is not there, even when clients are reluctant to express their concerns. Many times, in fact, clients are worried about their advisors. At the same time, though, a lot of advisors believe the fact that clients aren’t phoning at all is a sign that everything is OK. Don’t confuse this with a lack of concern — they may be so worried that they are afraid to call. The majority of clients hate the thought of being a burden. They also hate being in a state of conflict.

Try taking a direct approach to this problem. Tell your clients that most others are concerned they will not be able to retire comfortably and still maintain their current lifestyles. Tell them others also feel their portfolios have taken on too much risk, and then ask clients if they share the same feelings. By taking this approach, you help the client to no longer feel isolated.

Not only is it important for clients to express their concerns; it is even more important for them to feel that they can talk openly to you, without being considered a burden.

Set a service standard.

In June 2008, I wrote a column called Set a service standard. A service standard is a powerful and underused tool that outlines what clients can expect from you. Your service standard should be a list of commitments you make when serving clients. In creating this tool, it is important to set reasonable expectations and live up to that promise, giving yourself the opportunity to win by gaining client confidence. (Review this column; it contains sample tools for you to use.)

Whenever our industry endures a difficult time, our clients become more skeptical and discriminating. Your future success will depend on your ability to maintain their trust and confidence during this time. The implementation of new ideas takes work. It is up to you to decide how committed you really are.

Shawn O’Brien is head of Shift Consulting.

(01/22/09)

Shawn O’Brien