My colleague, Olivia Geldenhuys, wrote an article recently for an international trade publication on the topic of trust. It was written just before news of the suspension of the Woodford Equity Income Fund but the timing of its publication couldn’t really be better.
The general public’s trust in financial services has never been strong, particularly since the economic crash in 2008. But time is a great healer and just when it seemed the investment industry’s reputation was on the up, we have the situation where a very high-profile stock picker has had to freeze his fund as part of damage limitation. While the damage to the fund may have been mitigated, in terms of the industry as a whole there’s no doubt damage has been done. As our Portfolio Manager, Nic Spicer, said in his feature published by FT Adviser last week, “A media firestorm has ensued from the Woodford debacle.”
For a firm like PortfolioMetrix, which strives to provide a service that our adviser partners and end investors can trust wholeheartedly, it’s extremely disappointing.
Our ethos is to work with integrity and transparency and we expect our adviser partners to do the same. In her recent article, Olivia listed four elements that are essential to build – and to hold on to – trust, whether you are a financial adviser or an investment manager. While the dust settles on the Woodford fund, I thought it timely to reproduce them here:
Authenticity
Authenticity is at the heart of building trust. It’s one thing to claim a value proposition, but does your business behaviour stand up to this under scrutiny? Your clients will not simply take what you say at face value but will form their own opinions through their direct experiences. Our clients hold a mirror to us, which either confirms or rejects what we think we are projecting. Authenticity requires us to be humble about our abilities, be open to learning opportunities and patient in achieving our selected goals.
Competency
Competency is critical to establishing confidence in what you say and that it can be relied upon. Competency is a function of skill, your experience and the rigour of your logic. Your competency needs to be of high quality and communicated effectively. Clients value your expertise and rely on you to help them understand sometimes complicated concepts. This is true for the adviser/investment manager relationship too. We need to ensure that every investment decision is made in a robust manner that can be simply communicated. The effectiveness of our ability to project competence underpins confidence in us.
Consistency
Consistency is about the messages you deliver to your clients; it requires that you are upfront, accurate and transparent in every area of your business. In demonstrating that you are authentic and competent, it is critical that you deliver this message in a consistent manner, every time. Consistency provides comfort to your clients and projects reliability. When it comes to investment management, consistency is important not only in building confidence and trust with clients but also in achieving predictable outcomes.
Empathy
Last, but by no means least, empathy is the catalyst that takes relationships above a technocratic level. Establishing rapport creates a safe space for clients. Your relationship with your clients will succeed or fail based on your ability to not only understand and interpret their needs and circumstances, but to identify and relate to them. Innate empathy is what makes so many financial advisers good at what they do. In PortfolioMetrix, we constantly think about what we do from the perspective of our clients and adapt our actions to reflect their needs.
