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2 Biggest Reasons Clients Trust Their Advisors

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Vanguard recently published a research paper – Trust and Financial Advice that examines trust in the advisor-client relationship.

The research finds that a predominant number of investors trust their current financial advisors, with eight in 10 giving their advisors a high trust rating. However, nearly one-quarter had an experience that undermined their trust in their current or previous advisor.

“While there may be multiple reasons for distrust, the reasons most commonly cited related to investment performance and neglecting the relationship,” the report states.

Meanwhile, investors who have higher levels of trust are less likely to end their advisor relationship and more likely to refer friends and family to their advisors.

The report, which was written by Vanguard’s Center for Investor Research, assessed 32 attributes representing various advisor skills, practices, and behaviors as potential determinants or drivers of trust.

The report finds that the top two drivers of trust, according to the study, are “advocating for a client” and “acting in the client’s best interest,” at 17% and 15%, respectively.

Interestingly, the study finds that having the ability to “conceive, execute and reassess a financial plan” is ninth on the list. “It is one of the most important reasons for hiring a financial advisor and yet has just a 4% impact on overall trust,” the report says.

The research also draws a connection between high trust levels and positive business outcomes for advisors. According to the report, “investors who have high trust in their advisor almost unanimously say they are highly satisfied and likely to recommend the advisor.”

The study finds that more than three-quarters of the “high-trustees” have already recommended their advisor, compared with fewer than half of those with medium trust.

In addition to building the advisory business through new leads, high trust is also positively associated with increased share of a client’s investable assets. According to the report, 70% of high-trust investors say they are likely to give their advisors additional money to invest, while only one-third of investors with medium trust would do the same.

Trust is also related to client retention, according to the report.

For this report, data was collected in two phases. The first involved 18 in-depth interviews with advised investors in the United States age 30 to 75. The second phase included a survey of 3,955 advised investors who had at least $100,000 in investable assets.

— Check out Get Clients to Break Their ‘Money Silence’ or Lose Them on ThinkAdvisor.


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