Only one in five Americans fully trusted their financial advisor in 2012, a four-point decline since 2010, according to a new report.
Hearts & Wallets, Hingham, Mass., discloses this finding in the survey, “Trust-Building Practices: Updated Empirical Analysis of What Drives Trust.” The survey reveals the levels of trust that Americans place in their advisors and factors underpinning these trust levels.
The report shows that 21 percent of Americans placed “very high trust” in their financial advisor in 2012. This compares to 24 percent of Americans who held their financial advisor in similarly high regard in 2010.
The survey gauges trust on a scale of one to ten, where one signifies very little trust and ten very high trust.
The survey records similar differences between 2012 and 2010 in regards to marginally lower but still high levels trust on the ten-point scale:
● 9 points: 13 percent in 2012 versus 18 percent in 2010; and
● 8 points: 17 percent in 2012 versus 21 percent in 2010.
More Americans highly trust full-service brokerage and insurance practices than do self-service brokerages and banks, the report adds. The proportion of respondents who rate insurance and full-service brokerages a 9 or 10 are 37 percent and 37 percent, respectively.
This compares with the one-third of respondents (33 percent) and 27 percent of respondents who rank self-brokerages and banks, respectively, a 9 or 10 on the ten-point scale.
The average trust score by channel, the report notes, is as follows:
● 7.5—Insurance practices
● 7.3—full service brokerages
● 7.3—self-service brokerages
The number one trust driver, by a wide margin, is improving investor understanding of how the provider earns money, the report adds. Other factors cited by respondents include whether the advisor:
● is perceived to be unbiased.
● has clear and understandable fees.
● is seen as responsive.
● understands and shares the client’s values.
● Has made money for the client.
● has produced a “positive experience” for friends and family members.