Tackling the trust issue is one of the greatest challenges currently facing our industry.
Peter Malekas, Founder and MD of Moneysoft, explores practical ways for advisers to turn the tide.
We are experiencing a national crisis of confidence in our institutions. Our trust in business, government, media and non-government organisations has fallen drastically in the past year, and signs point to it getting worse before it gets better.
Australia is among the countries to have experienced an extreme loss of trust in the past year, with public trust in our institutions plummeting by a total of 10 percentage points between 2017 and 2018, according to the Edelman Trust Barometer.
The financial services sector was the second least-trusted industry in Australia, Edelman reported, with only the energy sector ranking lower.
Those results reflected public sentiment before the financial services Royal Commission began. Since then, the serious and widespread issues revealed by its hearings have sparked consumer outrage, government condemnation and media scrutiny.
Time for change
Those who have been part of the problem will need to face the consequences of their behaviour or inaction.
The rest of us need to be part of the solution. We can’t afford to wait for the Royal Commission to release its final report next year before taking action.
Rightly or wrongly, consumers are likely to see reluctance to change the status quo as tacit support for the issues that have been exposed. Most people (65%) say CEOs should lead change rather than waiting for the government to impose regulations, the Trust Barometer reports.
Financial planners face a greater challenge. Unlike retail banks and energy providers, they provide a discretionary service, making them more vulnerable to consumers voting with their feet and opting not to seek advice.
Raise your voice
People still want something – or someone – to believe in. With trust in institutions falling, individuals are gaining greater influence as voices of authority. Technical experts and academics have significantly higher credibility than institutions, and the gap is continuing to expand, according to the 2018 Edelman Trust Barometer.
At the same time, the advice market is continuing its move towards higher professional standards with consistent education and ethical requirements.
Advisers who demonstrate their competence can become powerful advocates for their own business. Whether it’s helping people develop greater financial literacy, demystifying industry jargon, or explaining how beliefs and biases can help or hinder achieving financial goals, sharing knowledge can be a powerful marketing tool.
Simply sharing useful, credible information from independent researchers and industry experts across your social networks can be a way to get started.
Be an open book
Transparency is a critical part of building trust. That means proactively providing the answers people are looking for before they have to ask.
Advisers need to go out of their way to satisfy their clients’ potential concerns.
That may mean advisers adopt an increasingly active approach to disclosing their structure and ownership, independence, remuneration structure, policy to address conflicts of interest, and investment philosophy. Millennials, in particular, aren’t averse to asking these hard questions of their advisers. They may not be all advisers’ clients today, but they will be in future.
To have the answers, advisers first need to ask themselves the tough questions. Are there changes they should make to meet clients’ expectations?
Being transparent also means making information easy for clients to understand. The top ranked factor that increased trust in financial services was having terms and conditions that were easily understood, according to the Trust Barometer.
Show, don’t just tell
Building trust and demonstrating value calls for action as well as words. Technology can help on both fronts.
People increasingly expect technology to be part of financial solutions. According to the Trust Barometer, 79% say it’s important for a financial services firm to use the latest technology.
However, clients are clear that technology plays a supporting role and personal relationships are front and centre. Nowhere is that more important than in the advice industry. Getting investment advice was rated as the most important financial service to be provided by a real person, according to Edelman’s survey.
Smart tools and increased process automation free up valuable time for advisers to spend interacting with clients. They can also make it easier for advisers to present complex concepts to clients and bring financial plans to life.
Using data analytics and open architecture, solutions can deliver real-time insights into clients’ actual financial situation and behaviour. Advisers can use this to model the dollar impact that even small changes can have to reduce debt or increase wealth, showing tangible value based on reliable information.
Further industry upheaval is likely to be inevitable as the Royal Commission continues to play out. Advisers who embrace the change stand to emerge stronger and more resilient, equipped to navigate the uncharted waters ahead.
This article was originally published in Adviser Voice on 17th July, 2018.