Executive Summary
As financial planning shifts increasingly to a pure fiduciary focus, many advisors have begun to differentiate themselves by explaining to prospective clients their fiduciary obligations, ostensibly in an effort to demonstrate that they are trustworthy. Unfortunately, though, the reality is that saying "You can trust me" is actually a terrible way to establish trust, especially when it's done using complex jargon that most consumers don't even understand! Even worse, in many cases an advisor talking about fiduciary status is less about demonstrating the trustworthiness of the advisor, and more about bashing the competition for not being worthy of trust - despite the fact that may make the advisor appear petty or desperate with little value to offer, and may actually prime clients towards distrust of any advisors! So what should financial planners do instead? Focus on conveying credibility more holistically, which includes a focus not only on motives and intent, but also the advisor's integrity, capabilities to deliver value to the client, and track record for positive financial planning results. And establish your trust and credibility not just by your words, but by your actions and behaviors. Or stated more simply: stop trying to establish client trust by saying you're a fiduciary; instead, build real trust with your clients by actually being one and behaving accordingly!
The inspiration for today's blog post is the video below by "The Trusted Advisor" co-author Charles Green, which makes the important fundamental point that if you really want someone to trust you, the worst thing you do is to actually say "Trust Me" - it reality, saying it is actually trust destroying!
Why "Trust Me" Is Bad For Trust
As Green points out, there are several reasons why saying "Trust Me" is bad for trust.
The first is simply that it's an implied contradiction. People who are trustworthy are not expected to say that they're trustworthy; just as you never hear someone say "humility is my greatest quality" because humility, as with trustworthiness, is something that others should say about us, not something we proclaim for ourselves.
The second is that telling someone that you should be trusted is like commanding them to do so, and most of us intrinsically don't like being told what to do. Especially when it comes to our emotions and how we feel about other people. As Green points out, telling someone to "lighten up" or "don't be angry" rarely has a useful effect, and "trust me" doesn't either.
The third reason why Green says it's not constructive to tell people to trust you is that it puts the cart before the horse, especially if you lead with it too early in the conversation or interaction with the client. You shouldn't tell people you're someone to be trusted; you should give them a reason to trust you based on the interactions and experience they've had with you, and let them form their own trustworthiness conclusion.
Green summarizes it well at the end of his video, stating that "trust is something that people offer to you, not a demand that you make upon them." You won't be trusted until you've earned the right to be trusted, which is something you accomplish through your (inter)actions with prospective clients, not because you tell them that you're worthy and deserving of their trust. Your actions will speak louder - and with more authenticity - than your words.
Why "Fiduciary" Is Bad For Trust
Fortunately, most financial planners have long since realized that saying "you can trust me" is a terrible way to build trust. However, it has become popular in recent years for many financial planners to say that they're a fiduciary... which, unfortunately, ends out producing the exact same (negative) result!
After all, why does a financial planner point out to a client that he/she is a fiduciary, or proclaim it on the firm's website? To make the point "as a fiduciary legally obligated to act in the best interests of my clients, I'm someone you can trust!" Even though, as noted above in Green's video, trying to say "I'm someone you can trust" is actually a terrible way to make people trust you! Especially when it's done on your website or marketing materials, before the prospective client has even met you (not that it's much better to say "Trust me, I'm a fiduciary!" in person, either). Of course, it doesn't help that most consumers don't actually understand what the word "fiduciary" really means, anyway... and talking to people using complex jargon that they don't understand isn't exactly a good foundation for trust building, either!
In addition, it's worth noting that while many planners say they're fiduciaries to imply that they're someone to be trusted, in reality it's a terrible way to define trustworthiness. After all, being a fiduciary means you are legally obligated to act in the best interests of your clients. If you were the client, who would you prefer to trust: someone who has the moral and ethical integrity to be worthy of trust, or someone who's simply legally obligated not to screw you? Simply put, saying "I'm trustworthy because the law requires me to be" is an absolutely terrible foundation on which to build trust!
Building Trust By Bashing The Competition?
The situation is even further complicated by the fact that in reality, saying you're a fiduciary actually says very little about you, and says more about your competition. After all, virtually no one says "I'm a fiduciary" just to make the point that he/she is trustworthy; it's said to make the point that it's a differentiator, and that the advisor must be more trustworthy than other advisors. Which means the reality is that saying you're a fiduciary is really about bashing the competition (since, as noted above, it doesn't really do much to establish yourself as being trustworthy!).
Unfortunately, though, marketing research regularly shows that most negative advertising campaigns backfire and make the company look petty and/or desperate. Even worse, it implies that the business doesn't have much to offer; after all, if the business really delivered value to clients, wouldn't it focus on that rather than talking down the competition instead?
Perhaps most insidious is the simple fact that talking about fiduciary - and implying others are not fiduciaries and therefore may be engaging in underhanded or criminal behavior - invites the client not to think about trust, but instead to think about distrust! And once the idea that at least some advisors can't be trusted is out, there's no way to get it back into the bottle. In other words, talking about why others can't be trusted psychologically primes the client to be thinking about distrust, and is actually a great way to invite a prospective client to question whether you can really be trusted, either. Especially when you're the one who brought up the issue of trust (and especially distrust) in the first place!
Similarly, this is why good advisors celebrating the decline of Wall Street firms is actually a bad thing for all advisors, including the good ones: because once you put the issue of distrust out in the open, it's hard to move past it.
The Real Way To Build Trust
So how should financial planners build trust with prospective clients, if it's not done by showing that the advisor is a fiduciary?
To think about the process of proactively building trust, I highly recommend Stephen Covey's book "The Speed Of Trust" which takes a deep dive look into what it is that really builds trust amongst individuals in relationships and between businesses and their clients. Covey finds that all trust is founded on four key core areas that lead to credibility: Integrity (do you walk your talk?); Intent (what's your motive/agenda?); Capabilities (do you have the relevant skills to solve the problems at hand); and Results (what's your track record for delivering value). Notably, while fiduciary does fit into the "Intent" category, it is only one of four cores, and Covey notes that ultimately, intent is demonstrated not by why you say about your intent (not the least because the core area of "Integrity" is built in part of Humility, which is undermined by saying you're trustworthy!), but by the behaviors you use to demonstrate it. In fact, at the most basic level, the old adage "people don't care what you know until they know that you care" applies here as well; in other words, demonstrate your intent to act in your client's interests by showing that you genuinely care about what your clients are interested in, not by telling them about your legal obligations.
It's also important to note that most planners do little to focus on the other areas that Covey finds are important for credibility, especially regarding your "Capabilities" and the "Results" you can deliver. In point of fact, the "capabilities" category is indirectly why it's so important for financial planners to eventually have a niche; prospective clients don't find it credible when you say you can do everything for everyone, and don't feel you're relevant with the necessary capabilities if you're not a specialist in their problems and circumstances. Similarly, most planners struggle to explain the value they provide and the results they deliver; while the regulatory environment generally bans the use of testimonials, partially restricting your ability to demonstrate your results, that doesn't mean you can't use anonymous storytelling techniques to at least illustrate to prospective clients the value and results you can bring to the table.
The bottom line, though, is that you're not making a good first impression about trust with your clients using words they don't understand to talk about your legal obligations to them (or just bringing up your legal obligations in the first place!)! If you really want to establish with your clients that you're worthy of their trust, demonstrate it through your actual behaviors and actions, and by providing them a holistic picture that demonstrates your integrity, intent, capabilities, and results. In other words, stop trying to establish client trust by saying you're a fiduciary; instead, build real trust with your clients by actually being one and behaving accordingly!
Excellent article. And yes, I’m conflicted in saying that, but it doesn’t mean I’m wrong!
You do a fine job of articulating the contradiction of “trust me, ” and in citing practical and sound ways of establishing trust. A very relevant article for planners.
Michael,
Great article. The point you make about “trust” is a good one. But I think your larger point is more important, that is, we as an industry are destroying ourselves. Much of the media, advertising, and marketing for our industry revolves around tearing each other down, rather than simply pointing out the great things about our own firms.
I know of one particular “service provider” in our industry that churns out article after article about how awful commission-based advisors are. That if you are using one, that you are ill-informed and are being ripped off. That if your advisor is charging commissions, they are “churning” you. That the ONLY way to knwo that you are using a “good” and “honest” advisor is to use a fee-only advisor. I am fee-only, and I personally find the antic-broker rhetoric to be obnoxious, bordering on dishonest at times. In fact because of this, 2 week ago I cancelled my membership to this registry which seeks to “educate” the public about fee-only advisors and provides a matching service for investors to advisors.
Sorry for the soapbox, but your article touched a nerve that has been irritating me for a while now. Until we do what your article suggests – avoid the “I’m more trustworthy than YOUR advisor” line, we will NEVER be considered a true profession.
I agree with you, Robert. Tearing down competitors has never been a good strategy.
In addition, citing fee-only as a guarantor of “good” or “honest” is tantamount to saying you should be trusted because you don’t have a conflict of interest. This comes dangerously close to sounding like Nixon’s “I am not a crook.” Saying you’re not conflicted is a pretty low bar to set, and by hooking one’s wagon to that horse, you just end up demonstrating a limited view of honesty, ethics and integrity.
Mr. Kitces is not the first to suggest claiming fiduciary status is saying “trust me” that will create the opposite effect. I think “trust me” is a strawman in this argument. When I tell someone that I am a fiduciary, and that I have a legal and moral obligation to perform in their best interests, it is not because I want the client to trust me, it is because I am informing the client of what they can expect of me. So saying one is a fiduciary is not categorically saying, “trust me,” it is saying “this is what you can expect from me, hold me to it.”
Also saying what the competition does is not aways bashing. It can be saying, “this is what you can expect from the competition.” Of course, tone can convey a negative message when the words are neutral or even positive. So tone is important.
Last, do you remember “The Uncola?” The 7-Up brand vastly upped its sales by using the unheard-of strategy of differentiating itself from the dominant Coca-Cola by placing itself in direct juxtaposition to that brand with a clever moniker.
I think there are a couple lessons here. One is that while consumers may be uneducated or uninformed, they are not stupid. They can parse subtleties quite handily when presented information. Differentiating oneself from the competition cy comparing an contrasting roles is important and can be useful.
Another is that these types of arguments, found on lot a financial planning sites that planners visit, often lack nuance and intellectual honesty and tend themselves to be dismissive of client intelligence.
Last, even when meeting a prospect in the context of a referral, one cannot demonstrate de facto trust but one can establish a connection with the client that invites them to check you out by saying what your highest duty is and comparing and contrasting roles with that of your competitors.
If I went to see a planner, an accountant or a solicitor and they told me that they will act in my best interests, I would immediately be suspicious. I would have expected that as a given! Why would I want to work with and pay someone who wasn’t working in my best interests?
Because the financial planning industry is still linked to the commission paying product selling side of financial services, planners tend to feel the need to tell clients how they are different to the ordinary financial adviser. When all a client wants is someone who will do a good job for them and act in their best interests!
So NAPFA and their whole Focus on Fiduciary campaign was misguided? My experience has been quite positive when we have framed a fiduciary obligation properly. Properly has meant juxtaposing the Fiduciary standard alongside the lessor Suitability standard (used by the brokerage community). Most prospective clients find themselves disturbed and enlightened once they have heard the difference articulated…from my experience.
I can accept the arguments about the term fiduciary and using it to imply “trust me”, but your definition of trust based on Steven Covey’s book highlights a big issue: Trust can only be gained over time when you interact with the client with integrity, honesty, and professionalism. Prospective clients won’t realize “trust” until they go down the road of becoming a client. So as an advisor who is interacting with a prospective client, I see no problem with educating and pointing out differences between broad categories of advisors. Don’t hit the prospect over the head with “trust me”, but instead just provide a basis for differentiation, then go onto the next topic.
Is there any research to support these statements or are they just opinions?
How is “best interests” operationalized and measured/defined? Over what period of time? Who makes the determination? If is cannot be measured reliably, is it just a sales platitude?