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Financial Planning > Trusts and Estates > Trust Planning

Advisors Ask Who's Trustworthy?

By Bill Miller

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It seems like a pretty straightforward question. Until a year ago, we probably didn’t give it much thought. Now, it seems like everyone is asking that very question. Your clients are asking it about you right now. Do they trust you to manage their money? If their portfolios are way, way down, they may be starting to wonder.

Even financial writers aren’t immune to these uncertainties. A writer I know has his brother — a big-wig at a very reputable broker-dealer — manage his money. As the market melted, their buy-and-hold mentality was tested. Well, they passed the test, but they lost 50 percent. Does that mean my colleague doesn’t trust his brother? Of course not. I’m sure he trusts him with his life. His life savings, however, may be a different story.

Financial advisors are asking themselves similar questions about trust. Do I trust my broker-dealer? Do I trust my firm’s research? Do I trust I still have a job? I’m sure Lehman Brothers and Bear Stearns reps trusted their broker-dealers right up to the bitter end of their stock options and jobs.

The trust issue has spread to the product companies as well. With many insurance firms struggling for survival, do your clients trust that all those great VA guarantees will be honored? Do the employees at those companies trust they still have jobs? One big mutual fund company recently played a round of American Idol with its employees. Groups of employees were directed into several rooms. The firm’s version of Simon, Paula, and Randy then went from room to room and told the occupants that they either made it to the next round (kept their jobs) or that it was the end of the road for them.

A pervasive lack of trust does funny things to people. It makes them rethink their life choices. Maybe burying money in a mayonnaise jar in the back yard wasn’t such a bad idea. After all, you can’t get bad advice from a hole in the ground. Maybe a career in financial services wasn’t the best idea either. Maybe we shouldn’t have substituted our dreams for the lure of a bigger paycheck.

Over the past year, I’ve talked with a great number of advisors and have conducted some very sophisticated research. Ultimately, I discovered that this breach of trust has herded advisors into three distinct categories:

1. The Dreamer Advisors. These shell-shocked advisors have had it; their camel’s back is broken. And they want just one thing: to leave the business. Many of these advisors have told me that they always wanted to go back to school, become a teacher, become a coach, open a diner, or become a “fill in the blank.” They believe that maybe — just maybe — there is happiness in something other than a well-executed credit spread on General Electric.

2. The Buy-and-Hold Advisors. These guys are going to suck it up, stay where they are, and take whatever beating comes their way. Many have weathered tough times before, and they view this storm like flatulence — it doesn’t smell pretty, but it is something that will pass.

3. The Cover-Your-Behind Advisors. These advisors trust no one. While they may not be moving to a new broker-dealer yet, like a squirrel gathering nuts, they are gathering information on every broker-dealer they can. They want to be prepared. If they see the grim reaper coming their way, they want an exit strategy other than death and destruction.

Of course, no one knows which group, if any, has the right of it. These are extraordinarily adventurous times — and, as we are learning, adventure is never fun while you are going through it. Ten or 20 years from now, I suspect we will look back and realize this is the time in our lives when we learned the most about ourselves. We learned exactly whom — or what — we could really trust.

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Once a mildly amusing comedian, Bill Miller now works as a recruiter for a top independent broker-dealer; reach him at [email protected]

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