In the Financial Planning and Wealth Management industries, we talk a lot about trust. It’s important that you trust your advisor. Just this morning I was on a call with a client trying to explain the inner workings of some of the different funds that we use in our portfolio and it was so tempting to say, “just trust me on this one.” The problem is, I don’t actually want you to “just trust” anyone with your finances, including me.
Every now and then my colleagues and I catch a glimpse into the performance reporting of some of our peers, whether it’s in the form of performance published on a website or brochure, or statements from a former advisor that a new client sends us. On occasion, we’ll dig into these statements and performance claims only to discover some form of performance manipulation. In financial speak, we call this cherry picking. When someone shows performance over an odd time frame that happens to show really positive returns but cuts the time frame off before a pullback, we consider that to be cherry picking. Likewise, when someone shows gross performance (performance before fees) without disclosing fees or anything else that is a legitimate detractor from gains, I would consider that to be a dishonest representation of performance. Furthermore, pairing the performance of an aggressive account with a relatively conservative benchmark may make your account’s performance look really great but it’s also misleading. When I come across instances like these, I’m tempted to shout “don’t trust anyone!” but I find myself tussling with the hypocrisy of that. Haven’t I written several articles on the topic of trust?
In her book Daring Greatly, author and researcher Brené Brown recounts a story about her daughter’s foray into trust in relationships. She notes how her daughter’s teacher has a jar of marbles in their classroom. When the students are behaving well, she adds marbles. When they are causing trouble, she takes out marbles. She then compares trust in relationships to the jar of marbles. Over time, we add marbles to our friendship jars, familial jars, and work-relationship jars when others illustrate to us that they are worthy of our trust. As the jar fills, that person gains even more of our trust and becomes someone we can depend upon to participate in our life story with us. When someone doesn’t protect our trust, we take marbles out of that jar and hopefully over time learn not to lean on them with the most important parts of ourselves.
When it comes to the client-advisor relationship, I recognize that we begin each relationship with an empty jar. My hope for myself and my firm would be that over time, we would garner the trust of our clients by filling the jar with trust marbles through our actions and good business practices. But I would also hope that along the way, our clients would hold us accountable for the work we do for them. When it comes to your relationship with your financial advisor, the best relationship you can have is one steeped in trust – after all, you are placing your life savings in their hands. However, I would encourage you (just short of begging) to not simply “just trust” them because they say to. Trust them because they’ve proven themselves trustworthy. Trust them because you feel comfortable asking them questions and because they answer your questions honestly and with sincerity. Trust them because they operate with transparency and because they have a longstanding history of seeking your best interests.
*This article was originally published November 15, 2017 on cedarstonecupcakeclub.com.