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.