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The Trust Mandate

The behavioral science behind how asset managers really win and keep clients.

Review and Commentary of the book by Herman Brodie & Klaus Harnack : By Montgomery Taylor

Introduction: The Asset Manager, the Wealth Manager, the Financial Planner, the Accountant – whatever we choose to call the care-giver who shepherds our financial lives — they are people. Like us. Herman and Klaus have summarized well what we should all expect from those within whom we have put our trust; and if trust is what we seek, what we should also expect from ourselves.

  1. Soft factors, nonperformance factors, which clients are looking for:
    • Consistent investment philosophy
    • Clear decision-making
    • Capable investment professionals
    • Understanding of the objectives
    • Credibility with the investment committee
    • The relationship manager
    • Useful written reports
    • Useful formal and informal meetings
    • The presentation to the client.
  2. The definition of trust
    • “Before taking a risk, clients want to be convinced the manager is both willing and able to act in their interests.”
  3. Role Trust
    • To improve role trust, financial service providers have an obvious interest in strengthening the number and quality of the signals clients refer to during their due diligence processes. This means securing certifications and qualifications, enhancing brands and reputations, and delivering on public promises.
  4. Interpersonal Trust
    • Clients looked for indications that their financial advisors were motivated to act in their interests. Emotionally, they wanted to feel secure and cared for. Clients also sought indications that advisors were competent, reliable and predictable.
    • The drivers of trust were the advisor’s client-orientation and intention, as well as the advisor’s expertise.
    • The advisor’s ‘likeability’ was not a factor in the emergence of trust. The likeability score only influenced the client’s willingness to recommend the advisor to others. Thus, likeability may only be helpful for acquiring new clients.
  5. Dual Dimensions of Impression Formation
‘Warmth’ refers to a benevolent orientation that puts others before self. This judgement is about whether others are: ‘Competence’ refers to the ability to make desired outcomes happen. This judgement is about whether others are:
Kind Relative strength
Friendly Power
Honest Efficacy
Moral Status
Accommodating Resources
Helpful Skills
Tolerant Knowledge
Fair Intelligence
Generous Confidence
Understanding Creativity
  1. Warm and Competent
    • The emotion evoked when we perceive someone as high-warmth and high-competence is admiration. These are the ‘lovable stars’, the kind of people we adore, respect, imitate, are proud of, and want to follow.
  2. How do Doctors win trust?
    • The strongest predictors of trust are physicians’ communication style and their interpersonal skills. Active listening, tone of voice.
    • Doctors are also more trusted if they take and active interest in the wider well-being of their patients. Holistic approach. Involves educating their patients. Directing energy at the task.
    • Doctors have a Hippocratic Oath. A moral code of conduct. A firm could make their own.
    • A trusted advisor has the effect of alleviating some of the client’s anxiety about the riskiness of any given investment.
    • In the eyes of the client, a cold advisor earns fees; a warm advisor deserves
  3. Interpersonal Trust
    • Warmth can be seen in the advisor’s informality, family orientation, and self-deprecation (play down your own importance).
  4. Trust by Physical Cues
    • Researchers found that serving hot drinks during a business meeting is useful for eliciting favorable first perceptions.
    • There are some natural odors everyone seems to like. There was one odor that did prompt a significant increase in trusting behavior: lavender.
    • Impressions of ‘openness’ were left by the distinctiveness of the workplace, the decoration, the quantity of magazines, and the quantity and diversity of books.
    • ‘Conscientiousness’ was signaled by the orderliness of the work space, its cleanliness, and the absence of clutter.
  5. Trust by Social Cues
    • If a stranger is like us, it is more likely that we will trust him. If an unknown person reminds us of ourselves because of the way he looks, dresses, talks, etc., we tend to attribute to the person the same qualities we attribute to ourselves.
    • “A person’s name is to that person, the sweetest, most important sound in any language”, according to Dale Carnegie.
    • It is well-documented that a person in conversation with someone they like or admire will involuntarily mimic that person’s physical gestures or mannerisms. ‘Mirroring’ is effective in promoting warmth.
    • Eating the same food as another person has the effect of bringing them closer and increasing liking, which leads to increased trust and cooperation.
    • When introducing someone, describing them as warm and friendly, will increase the likelihood that the person will perceive them in this way.
  6. The Warmth-Competence Trade-Off
    • If advisors want to be viewed as warm, there are two things they must be willing to do:
    • Stop pushing on the competence dimension.
    • Concede some of that competence perception in exchange for warmth.
    • Clients attach more weight in their evaluations to be warmth perception than to they do to the competence perception.
    • When the client says, “Tell me about yourself”, they’re not asking about competence – they want to know about your warmth and good intentions.
  7. Stop trying to appear competent
    • In our ‘pitch book’ provide prospects with the information necessary to allow a judgement about the team’s intentions. Reveals the advisor’s motivation to act in the client’s interest.
    • It is counterproductive for advisors to give themselves status in from of their clients. Rather, they should give their clients status.
    • The client will not expect a competent individual or firm to be competent 100% of the time. So, a periodic admission (of a mistake) would not durably damage competence perceptions—but it would boost warmth perceptions.
    • Clients like video clips. That the firm goes to the trouble and expense of producing a video demonstrates that it cares more about what the client hears than about what the firm says.
    • No amount of competence can compensate for a lack of warmth.
  8. Value Congruence
    • Values clients may approve of could include things like fairness, honesty or openness. Also, reliability or good manners.
    • A firm’s long history in the industry, its independence, or its patronage, could be among these values.
    • The firm’s support for charities, defense of the environment, sponsorship of sports or the arts, or even political leanings are potential values.
    • Knowing your client and their values might allow you to develop closer trust relationships.
    • A value is not a value if one needs to tell people about it. So, shared values need to be put on display discreetly, such that clients find them on their own.
  9. Caring
    • A caregiver is someone who pays anxious attention to another’s well-being. Advisors who care for their clients worry about their clients’ well-being in the widest sense. They are considerate. . . express concern for anything. . . they seek to educate. . . and take time to do so.
    • This kind of behavior reveals the advisor is more interested in their outcomes. Caring demonstrates to clients that they occupy a privileged position, that they are part of the in-group, that they are ‘one of us.’ It implies benevolent intentions and typically prompts reciprocation.
    • The desired result is to make clients feel as though they are cherished members of our family.
    • The closest psychological distance is that of a family member: “If you were my son/mother/spouse, I would recommend. . .
  10. Be trustworthy for me
    • Clients know that past performance is not a guarantee of future performance. So, they focus on the factors that will inform them about what the relationship will be like.
  11. Be you for me
    • Clients want to discover something about the individuals, and about what makes those people tick. They will gather it from the way you look, how you dress, the activities you’re engaged in, the appearance of your office, people you hang out with, etc.
  12. Care for me
    • Clients want to be cared for. Advisors whose values genuinely overlap with those of a prospective client have a clear advantage.
    • Advisors must do the work to identify areas of value congruence with clients and use these perspectives and attitudes in their communication. Learn to listen.
  13. Do something
    • Clients want to have a high-trust relationship with advisors. Each party will draw advantages.
    • Every client contact is an opportunity to convey warmth.

Montgomery Taylor is a writer, wealth manager, and author ofHappy and Secure in Sonoma County, before it’s Too Late, and The New Rules of Success. Monty lives in Santa Rosa, California with his wife of 40 years, Terri. You can reach Monty at monty@montgomerywealth.com or schedule an appointment with him at 707-576-8700.