An academic study into the characteristics of trust in personal financial planning has identified seven characteristics. These being: vulnerability/risk, feeling, honesty, faith, best interests, accountability and competence.
Let’s take a look at these seven characteristics in more detail.
There must be an element of vulnerability or risk in order for trust to exist, whether it be a situation that a client finds themselves in (such as divorce or inheritance) or a lack of knowledge. The risk faced by clients is that the advice may not assist them to achieve their goals or worse still, may place the client in a worse position than they were prior to obtaining financial advice.
Trust was found to have a large affective component – described as a ‘feeling’. For trust to exist between a client and a planner, cognitive characteristics of trust must be accompanied by the affective characteristic that clients simply describe as a ‘feeling’.
When clients were asked to explain what trust meant, they often referred to honesty with financial information provided and honesty with fees and commissions earned by the planner.
Dissatisfying external events, such as the GFC, provide a real opportunity for a planner to demonstrate their honesty. Rankings for honesty of financial planners providing advice following the GFC were higher, as clients found that the sound advice provided to them by their planner at the time of the GFC increased their trust in their planner.
Clients who reported their planner to be dishonest had also ranked their adviser as untrustworthy and did not return to their planner for subsequent advice after the GFC.
A client must have confidence, or faith that their financial planner can be relied upon to provide the right advice. Dissatisfying events, such as the GFC, losing money on an investment, or not following up on a client, can lead a client to lose faith in their planner, which in turn leads to a lack of trust.
Clients trust their planner when they perceive that the planner acts in the client’s best interests. Where clients believed a planner acted out of self-interest, they also reported them to be untrustworthy and as ‘marketing oneself’.
Clients trust planners if they believe their planners are accountable to their employer, regulatory authority and professional body. Such findings support recent reform to make unethical planners more accountable.
Clients who trust their planner rated the behavioural competencies of their planner more highly than those who did not trust their planner. Behavioural skills were also associated with planners who provided useful and relevant statements of advice (SOAs).
Qualifications were the most prominent theme raised by clients when discussing trust in the context of personal financial planning. Clients who knew their planner’s qualifications ranked their planner’s technical and behavioural skills higher. Planners who held qualifications relevant to financial planning were trusted, while those with no relevant qualifications were not.
Furthermore, all clients who found their SOAs to be both useful and relevant also ranked their planners to have higher technical-based competence skills. In addition, clients felt strongly that planners should be required by legislation to gain some recognised accreditation.
This study suggests that financial planners should carefully consider the way in which they interact and communicate with their clients in order to gain their clients’ trust.
“Capstone made everything so easy by providing all the templates and support we need which makes me feel comfortable that I am in good hands with my licensee. I would highly recommend Capstone to any fellow Accountant."
“I would recommend Capstone to any accountant seeking to become licenced within the financial services industry. Their personal service and support to me and my firm has been exceptional."
“I joined Capstone Financial Planning in 2003 as I was looking for a Group that could offer a high level of independence and freedom that came from not being institutionally owned."
Willow Wealth Management
“Compliance support and feedback is crucial to our business. The Capstone team are always there to assist us in improving and providing best advice and best practice standards. Their input is always positive and constructive."
Nicholson Financial Planning
“I would happily recommend Capstone as a licensee to other advisers. The Capstone staff are friendly, knowledgeable, and professional, and they are genuinely committed to meeting their advisers' needs. I feel very secure in the knowledge that I have Capstone backing my business.”
Acquire Strategic Advisers
“Capstone’s support has been exceptional and consistent from the time our business made the transition. Capstone is continually trying to enhance their service offerings to their advisers, at both the higher level, and more specific lower levels within our business. They are an exceptional licensee and lead from the front.”
“I can highly recommend Capstone for planners seeking an independent licensee that’s not in your face but provide quality support services. Their service and support is second to none and has allowed us to concentrate on providing our clients with a premium level of service.”
“Having been with Capstone for a number of years, one thing that really stands out is their willingness to help and can do attitude. These are qualities we really appreciate.”