Financial advisors are hired to help their clients make sound investment decisions. However, not everything is as simple and honest as it may appear (or the client wishes it was).
Earlier this year, a federal appeals court struck down an Obama-era rule that requires account managers to put clients’ interests ahead of their own, according to a Bloomberg article. This ruling made many in the Chamber of Commerce and business sectors happy, while it left clients feeling uneasy.
Now, many consumers may distrust financial advisors and feel unsure of how to choose someone to help manage their money. How can financial advisors convey trustworthiness and that they have the clients’ best interests at heart? Below, eight members of Forbes Finance Council expand upon the ways leading financial advisors build trust with their clients and let them know their intentions are good.
1. Lose The Jargon and Speak Plainly
Advisors who follow a true fiduciary standard have an advantage over advisors who do not, but saying “fiduciary” or “fee-only” is not enough. This is because these terms are not familiar to clients, and lack of clarity is unlikely to engender trust. Actually explaining what they mean in plain English is a great way to differentiate from the competition and convey a sense of trust at the same time. – Wei Ke, Simon-Kucher & Partners
2. Put The Clients’ Interests First
Since the creation of the federal securities regulatory structure in the 1930s, one thing is clear: Bad actors will be bad actors regardless of how many rules are created to protect the public. Ethical advisors earn clients’ trust the old-fashioned way. Put the clients’ interests first, do what you say you‘re going to do and treat others with respect. The good guys do win in the end. – Erik Christman, Oxford Financial Partners
3. Be Transparent With Fees
Build your clients’ trust by being transparent about fees and demonstrating your value. When discussing fees, be open and honest, and try to avoid complex jargon to ensure they understand. It is also important to share how you will add value to their lives and discuss all the services you provide. Always ask for feedback, continuously support their goals and encourage their participation. – Stacy Francis, Francis Financial, Inc.
4. Focus On Building Trust
Despite the demise of the DOL rule, most advisors will act as fiduciaries and should use this opportunity to differentiate from those that don’t. This episode created awareness of how much conflict of interest still exists. Transparency is key. The more advisors share about compensation, what they will or won’t do and conflicts of interest, the more trust they’ll build with clients. – Robert Roley, SS&C
5. Always Be a Fiduciary
Advisors can convey their trustworthiness by always being a fiduciary, regardless of regulation, and eliminating any conflicts of interest. This will require the advisor to put the client first and eliminate any forms of direct or indirect compensation aside from the fee the client pays for advisory services. – Josh Fein, AdvicePeriod
6. Let Your Clients Do The Talking
I’m a big believer in having my past clients speak to my prospective clients, when possible. In addition, I work hard on compiling online reviews that I can direct people to so they can read about my business directly from the perspective of past clients. No one tells your story better than past clients. Focusing on getting reviews and letters of recommendation have always been a part of the plan. – Jared Weitz, United Capital Source Inc.
7. Understand Before You Recommend
Professionals can convey their fiduciary responsibility on the clients’ interests by being focused on the clients’ needs and objectives. We have to do a better job in our industry of discovering the needs plus the emotional aspects of any financial decision for our clients. Once clients are confident that the planner understands their goals and objectives, they should have a long-term relationship. – Mike McGlothlin, ashbrokerage.com
8. Uphold the Fiduciary Standard
Financial advisors can build trust with their clients by being transparent. Be upfront and clear about your fee structure and what services your fee covers. Eliminate conflicts of interest that may impact the objectivity of your advice by abiding by the fiduciary standard. – Jay Shah, Personal Capital
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