Trust is key to the relationship between a financial adviser and their client. It’s not simple to establish, build or maintain trust. And trust can easily be broken. Understanding the science behind what makes -- and doesn’t make -- a successful and trusting relationship can help drive and deliver trusted financial advice.
What makes up trust in advice
Research1 shows there are three elements to the trust people place in the relationship with their financial adviser. These elements ranked in order of the greatest impact are:
- Emotional trust (53%) – the positive feeling of trust someone gets about their adviser
- Ethical trust (30%) – trusting an adviser is acting in their best interests
- Functional trust (17%) – trusting an adviser’s skills and qualifications
What drives trust in advice
Understanding what makes up trust in financial advice is important. Having an awareness of which behaviours have the most significant impact on trust may help advisers improve the trust in their financial advice relationships.
The research2 isolated 19 attributes that financial advisers display across emotional, ethical and functional trust. Then they ranked what people who receive financial advice thought was most significant to them.
The results show advocating for a client and acting in the client’s best interest are the top two drivers of an adviser’s trustworthiness.
The top five drivers of trust in financial advice are:
- Is my advocate, pursuing my goals almost as if they were their own (17%)
- Will act in my best interest at all times (15%)
- Is someone I can relate to or make a connection with (9%)
- Provides me with a sense of relief and allows me to sleep better at night (7%)
- Offers products and solutions that are in tune with my financial goals and risk tolerance (7%)
The science of trust in advice
Breaking down the science of trust in advice further may help advisers deliver more trusted financial advice. It may also help people feel more confident about the financial advice they receive and improve their financial wellbeing.
Griffith University researchers analysed hundreds of questionnaires and interviews with Australian financial advice clients and advisers to find seven characteristics of trust they say are essential to a client-financial adviser relationship.2
The seven characteristics of trust are:
- vulnerability and risk
- feeling
- honesty
- faith
- best interests
- accountability
- competence.
7 essentials of trust
- Vulnerability and risk: The researchers found that for trust to exist, there first must be vulnerability and risk. A client might be vulnerable because they find themselves in a new situation, such as divorce or receiving an inheritance. They might be vulnerable because they don’t know what to do to manage the finances of this situation or they’re unsure about their finances, so want help. There’s also risk. The risk can include that the help or advice they get might not help them achieve their goals or, worse still, may put them in a worse position than they were before they got the advice.
- Feeling: The research also identified the feeling of trust, which was trickier to define. It found that for trust to exist between a client and an adviser, clients had to feel that they could trust the adviser.
- Honesty: When clients explained what trust meant to them, they often referred to honesty. This meant their adviser was honest with the financial information they gave as well as honesty with fees and commissions they earned.
- Faith: The study found faith or confidence that a person could rely on their adviser to provide advice that was right for their situation was important to trust. An adviser doing the things they’ve promised to do also built trust.
- Best interests: Interviews for the study showed advisers earned trust when a client thought that the adviser acted in their best interests. When they believed an adviser acted out of self-interest, they reported them as untrustworthy.
- Accountability: People also said they trusted their advisers because they understood that their advisers were accountable. Advisers being accountable to their employer, regulatory authority or professional body made clients feel more protected.
- Competence: Competence, shown in an adviser’s skills and qualifications, was a vital characteristic of trust. Advisers who provided useful and relevant statements of advice ranked higher on trust. But it’s not just performance. Interpersonal communication skills such as listening, caring and friendly and professional behaviour are all considered part of an adviser’s competence.
How financial advisers can develop trust
A successful financial advisory relationship is based on deep trust. Science shows emotion drives trust. It starts from a position of vulnerability, with an adviser advocating and acting in their client’s best interests central to building trust.
Using a science-led approach, financial advisers can effectively build and maintain trust with their clients using a four-part framework. The components of this trust framework are:
- trustworthy behaviours
- authenticity
- reliability
- acting in the client’s best interests.
Find out about the science-led approach to building trust with advice clients. The four-part framework is examined in the Ensombl whitepaper The ART and Science of Trust available online at https://ensombl.com/articles/the-art-and-science-of-trust/
1. Madamba, Anna and Utkus, Stephen P. October 2017, Trust and financial advice, Vanguard research, accessed 11 July 2023.
2. Cull, Michelle, Sloan, Terry, Financial Planning Research Journal, 30 May 2016, Characteristics of trust in personal financial planning, accessed 11 July 2023 at griffith.edu.au
3. Ensombl white paper, The Art and Science of Trust, 2 August 2023, accessed 8 August 2023 at https://ensombl.com/articles/the-art-and-science-of-trust/