Trust. It lies at the heart of what we do as financial planners. Without a trusting relationship with clients, we cannot work constructively to advise them and help them to achieve their goals. At a broader level, if the public does not trust financial planners, they will be unwilling to work with us in the first place.
Yet at the same time, there is not necessarily a clear agreement amongst financial planners about what exactly it is that best inculcates that trust relationship. It is about establishing the credibility as an expert to become a trusted advisor for the client? Or the intimacy and authenticity necessary to ensure that the client feels safe and comfortable to share with you in the first place, and be willing to act on your recommendations?
If you had to pick one factor as the primary one leading to trustworthiness, which is more important to you: credibility, or authenticity?
The inspiration for today's blog post is an article featured in this past Friday's "Weekend Reading" column, published by financial planner Carl Richards (also known for his BehaviorGap work) in the November 8th issue of the New York Times. In the article, "How a Financial Pro Lost His House", Carl shared his own intimate story of how he got caught up in the real estate boom in Las Vegas, bought "too much house" and eventually had to give it up in a short sale. The article seems to have stirred a bit of controversy, in part simply because of the moral controversy surrounding short sales, but also in regards to how Carl's story as a financial planner who made financial mistakes of his own reflects on financial planners at large.
From what I have seen, there appears to be two camps regarding the article. The first complains that the article is a blow to the credibility of financial planners with the general public. As the view goes, how can financial planners claim expertise in guiding people about financial decisions when we make such catastrophic financial decisions of our own? Accordingly, detractors suggest the article has a "do as I say, not as I do/did" tone to it that can undermine credibility in the eyes of the public. And notably, this view is also highlighted in many of the public comments to the article, which are filled with negative feedback, either suggesting that the article was just an attempt to promote Carl's upcoming book "The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money" or that the article demonstrates the incompetence of advisors ("see, financial advisors aren't experts and don't deliver value; they can't even make their own good financial decisions").
On the other hand, there is clearly a camp that loves the article. Although not seen as loudly in the public comments, I have witnessed several discussion threads about the article that are much more upbeat, and Carl himself reports dozens and dozens of financial planners who have contacted him privately to express support and appreciation for the article. The people in this camp note that in the end, financial planners are human beings, and as human beings we too will make mistakes. We can't avoid them; we can merely either acknowledge to and admit them, or try to hide them and pretend to be unrealistically perfect. In the end, this group applauds the intimacy and authenticity of the article most of all, and the implicit trust that it inspires.
To me, the fundamental disagreement gets to the heart of what it is that does, or does not, build trust. The detractors of the article are implicitly suggesting that credibility is at the core of our trust relationship with the public. Accordingly, things that undermine credibility - such as publicly acknowledging our faults and failures, even while professing to be the expert that can help others navigate such challenges - will undermine our public trust. On the other hand, the supporters of the article are implicitly suggesting that authenticity and intimacy are at the core of our trust relationship with the public. Accordingly, the genuineness and vulnerability that Carl reveals in the article while sharing his difficult past create an intimacy and authenticity that advance our public trust.
So which one is "right" - is it about credibility, or about authenticity? Some recent research by Charles Green at Trusted Advisor Associates suggests that in reality, both play a material factor. As he explains it, the trust equation is made up of four factors:
( Credibility + Reliability + Intimacy ) / Self-Orientation = Trustworthiness
As a formula shows, anything that increases the numerators of Credibility (can we believe what you say?), Reliability (can we depend on your actions?), or Intimacy (do we feel safe sharing information with you?) can increase trust levels, while anything that increases the denominator Self-Orientation (are you focused more on yourself than others?) will reduce trust. Thus, we maximize trust by increasing some combination of credibility, reliability, and intimacy, while reducing our self-oriented focus (i.e., by focusing more on the people we're helping, rather than ourselves).
Accordingly, it appears that both camps are right to some extent. As the trust formula shows, losing credibility does undermine our trustworthiness; at the same time, improving intimacy through authenticity clearly increases trust, too. The question is whether the "loss" of credibility exceeds the "gain" in intimacy, or vice versa, as to whether there is a net increase or decrease in trust.
Anecdotally, it appears to me that those who themselves rely on credibility as a primary factor for trust ("The Expert" trust archetype) view the article as a negative and suggest that the credibility loss exceeds the intimacy gain, while those who rely first on intimacy as a driver of trust view the article positively (intimacy gains are worth more than any credibility losses). Green's work shows that there are actually six different trust archetypes, depending on which two (out of four) factors are the focal point of your own trust framework. (If you're interested, you can see which archetype fits you best by taking the Trust Quotient Quiz yourself.)
So what do you think of the Carl Richards article? Does it advance the financial planning profession with the public, or not? Does the intimacy and authenticity of the article carry the day? Or is it a blow to the credibility of the profession when "ever the experts make mistakes?" How do you evaluate trust? Does Credibility outweight Intimacy for you, or is it the other way around? Is there a difference between which factor is most important in a one-on-one client relationship, versus the profession's relationship with the public at large?