It’s A Matter Of Trust

Posted on : Aug 26, 2013 | Filled under : News

Trust is the foundation of the advisor/client relationship. As with selecting other service providers, such as a family physician, the client frequently chooses the financial advisor whom they trust the most.King Wealth Planning-Trust

A study by the Wharton School of the University of Pennsylvania looked at three levels of trust. The first is trust in technical competence and know-how. Investors are looking for someone whose competence inspires trust.

According to Rachel Croston, professor of information management at Wharton, this type of trust is encapsulated by the question, “Do I trust that you know what you’re doing?”

The second level is trust in ethical conduct and character. Croston believes consumers distill this into one basic question: “Do I trust you not to steal money from me?” This is where an advisor’s reputation matters greatly.

Third is trust in empathetic skills and maturity. This element of trust focuses exclusively on the interpersonal relationship. Without this level of trust, which we might call relationship competence, the advisor/client relationship is extremely fragile. Essentially, this trust is built on the premise that, “If I confide in you as my advisor about private and important matters, I need to trust you will handle it appropriately.”

Dr. James Grubman, a specialist in wealth counseling, points out that wealth brings unexpected stresses and coping with money issues can be difficult. Many advisors struggle with the skills needed to solve interpersonal issues associated with wealth management.

Grubman’s bottom line: Clients are more comfortable and more likely to continue their relationship with advisors who integrate the financial and the personal into their practices.

According to Richard Marton, professor of finance at Wharton, the value of financial advice is, increasingly, not really managing the money, but in the “softer” advisory element — personal counseling and instruction. He said, “The advisor has to understand the logic behind the advice and work the argument through with the client so the client really understands it.”

The Wharton study asked clients for the most important characteristics of a financial advisor. Here are the results: Trustworthiness, 69 percent; understanding family needs and goals, 20 percent; communication practices, 16 percent; low cost for services provided, 12 percent; and performance, 10 percent.

It’s a matter of trust.

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