Financial advice built on trust
3 minute read
As people approach – or enter – retirement they may be looking to manage the largest sum of money they’ve ever accumulated and making plans for that money to last the rest of their lifetime. When it comes to seeking help and making decisions about that money, trust matters.
Why financial advice
Financial advice from a trusted adviser can help people feel confident about the choices they make today and help them feel more secure about their future. Research by Australian Retirement Trust (ART),1 one of Australia’s largest super funds, found the three main reasons members of the fund seek financial advice are:
- to access expert opinion and experience
- to create peace of mind and confidence
- to help them with their retirement.
Of ART members who receive advice, more than 80% value having someone they trust looking out for them and acting in their best financial interests.
Why trust matters when moving to life after work
Retirement can be a stressful time. On the Holmes and Rahe stress scale of the 43 most stressful life events, retirement comes in at number 10.2 That scale includes everything from divorce and the death of a spouse to going to jail or changing your diet, and shows retirement is the top-ranking financial stress trigger.
As people approach or start retirement, they may experience stress over the end of a job or career, struggle to switch off from work, or feel anxious about having more time on their hands. Then there’s worries they may have about managing their finances.
Trust is a key factor in why people may turn to professional financial advice as they approach retirement, and who they choose to advise them. Choosing to trust an adviser means they accept their vulnerability and are willing to depend on someone for financial advice. It’s why delivering on trust is so important in professional financial advice.
What makes up trust in financial advice
Researchers found that there are three elements to the trust people place in the relationship with their financial adviser.3 These are:
- emotional trust
- ethical trust
- functional trust.
The research found emotional trust has the greatest impact on overall trust. It accounts for 53% of the trust people may place in a financial adviser. After emotional trust is ethical trust (30%) and functional trust (17%).
Emotional trust factors include the positive feeling people get about their adviser, such as knowing the adviser is advocating for them, making them feel like their portfolio is important, and feeling a sense of relief that they have good guidance.
This compares to functional factors like an adviser’s qualifications and skills, or ethical factors such as an adviser charging a reasonable fee and not having a conflict of interest.
Trusted advice in retirement
The studies into trust and financial advice show that it’s not enough for financial advisers to do simply what they’re hired to do – provide financial advice. Advisers need to deliver on emotional trust, ethical trust and functional trust.
A trusting relationship with a financial adviser may help a person enjoy preparing or entering retirement. When there’s trust, the partnership is likely to be deeper and more open, which allows the adviser to be more effective in providing meaningful advice. It also means a client may have a deeper understanding of the value of that advice.
As ART Head of Advice and Guidance Anne Fuchs told the Ensombl podcast, The Art of Trust,4 developing trust can help both an adviser and client work together to achieve a client’s financial goals.
“To me, the trusted exemplars of any profession, including financial advice, are those who simplify the complex. They also realise that educating the client reinforces, rather than undermines, their professional expertise, as the client better understands and values the advice they receive,” she said.
We are here to help. Learn more about how we can help you build trusted relationships with your clients by speaking to a Business Development Manager today.
1. Research conducted by Australian Retirement Trust, August 2022, Advisers n=229, Advised members n=775.
2. The American Institute of Stress, Homes-Rahe Stress Inventory, accessed 11 July 2023 at stress.org
3. Madamba, Anna and Utkus, Stephen P. October 2017, Trust and financial advice, Vanguard research, accessed 11 July 2023.
4. Ensombl podcast, The Art of Trust, 21 September 2022, accessed 11 July 2023 at ensombl.com/podcasts