Our industry is built on the foundation of trust. It is why ethical conduct is paramount in investment management. 

In fact, trust and ethical conduct are more important to clients than fees and performance combined, as shown in the results of a 2013 investor trust survey by CFA Institute & Edelman.¹

There is a wealth of literature on trust in the fields of psychology, economics, and other social sciences. The client-advisor relationship has also been extensively researched. Formally, this relationship is defined as “the expectation that the advisors (trustee) can be relied on to act honestly, competently and in the best interests of the client (trustor) and thereby reduce the trustor’s risk of loss.² 

But all Investment firms, portfolio managers, financial advisors, and planners are in the business of growing assets under management both through their investments and by acquiring new clients. Essentially, they must have a sound sales process to grow their business, since higher AUM translates to higher fees and commissions. Research finds a paradox of trust where direct, high-pressure “selling” tactics lead to high degrees of distrust between the buyer and seller.⁴ Ethical practitioners will identify the most suitable products based on individual circumstances, regardless of the commission they receive, and follow the “rules of the game.” 

Beyond the sales process, there are other aspects of trust in a client-advisor relationship. The CFA Institute & Edelman Investor Trust Study⁵ also emphasizes other behavioural aspects of professionals that help build trust: 

1. Transparent and open business practices
2. Responsible actions to address an issue or crisis
3. Ethical business practices

Another study by Kirchmajer and Patterson (2003) offers a slightly different perspective. It shows that the most important element of trust is social communication, or the “informal transfer of information, discussions of a social nature and two-way communication.”⁶ This implies that the goodwill the advisor builds with client is the key element that sustains the relationship. Just like any other relationship, it needs to be nurtured on an ongoing basis to ensure that the level of trust is maintained or enhanced over time.

This is easier said than done. Investment professionals, like many other service providers, operate both online and offline and have a multi-dimensional presence in both personal and professional spheres, given their activity on various social platforms. It is important not only that they have an online presence, and that it be consistent with their brand—most importantly, that presence must build and enhance trust. 

Why digital trust matters 

Consider this June 2015 study from McKinsey that looks at the growing trend in virtual advisory services.⁷ It estimates that 42 million households, representing US$66 billion in annual revenues, are prime candidates for virtual advice.⁸ These customers are not just millennials; the trend is growing in all demographics. It is no surprise that institutions around the world are building execution expertise in delivering remote advice, entering new markets, attracting new clients, and reaping significant cost advantages.⁹ 

Combine that with the power of social selling, a phenomenon enabled by social media where business is done not by selling directly to customers, but by engaging with and nurturing them in meaningful ways that build credibility with the target audience over time. This trend is only getting stronger, replacing traditional tools of marketing and advertising. 

According to the research and advisory services company CEB, a person is already 57 percent of the way through the purchase process before they ever engage with the professional.¹⁰ In other words, prospects have most likely already made up their minds about whether or not they will conduct business with a professional before even talking to one. That statistic also implies that a professional’s online presence has the same effect as a word-of-mouth referral from a satisfied client, influencing a prospect to make a favourable decision.

LinkedIn also provides its members with a Social Selling Index (SSI) to let them see how their online presence compares to others in their industry and network. To find out your SSI, go to  www.linkedin.com/sales/ssi.

Building digital trust

Given the importance of trust, and having an online presence, let’s first consider how to build trust online. Some basic principles of offline trust can be extended online. According to a feature in Deloitte Insights,¹¹ there are four main pillars of digital trust, two of which are unique to one’s online presence: 

1. Ethics and responsibility: Use technology to provide better customer service and enhance customer welfare by resolving complaints faster, stopping misinformation, being inclusive, and ensuring ethical and appropriate use of technology.
2. Transparency and accessibility: In the online context, this means enabling customers to evaluate the company’s offerings, especially with easy-to-understand disclosures; these disclosures enhance trust in the organization’s (or professional’s) intentions to deliver quality products, both online and offline.
3. Privacy and control: Being transparent about what data is collected and giving users control over their data, particularly personally identifiable information (PII), builds trust and gives clients confidence to engage in responsible business practices.
4. Security and reliability: With increases in cyberattacks and reliance on smart devices, customers expect their data to be secured with the latest technology.

Most of these elements for building trust are now essential for meeting clients’ and prospects’ expectations for our industry to align with such business practices in virtually every other industry. So, what can professionals do to go the extra mile and enhance trust in a way to gain a competitive advantage?

Enhancing digital trust

Here, we take inspiration from the best practices of social selling to enhance trust in a way that differentiates us from the competition: 

1. Show up: Prospects and clients will almost definitely research you online. Look at your social media presence from a client’s perspective and consider how your personal and professional brand is reflected.
2. Listen strategically: Your target demographic is also online; there are several tools and strategies to engage with your audience online and tailor your services to what the market needs. Social media listening software such as Hootsuite and Sprout Social, for example, has become a product category in its own right.
3. Provide value: Participation is mandatory but not sufficient. Directly selling or pitching your services to prospects is no longer effective. What works best is providing the right information at the right time, establishing yourself as the expert in your field. Building credibility over time makes the prospect-to-client conversion smoother. 
4. Build meaningful relationships: This is no different than nurturing your offline relationships: you stay in touch and talk from time to time, liking and commenting on each other’s posts and building an online camaraderie over time that enhances your trust appeal with the power of the network effect.

The dynamics of a network work in favour of those with a head start. The ones that arrived earlier can grow their network faster than those that came after. In addition, building credibility online is a lot like establishing a track record for investments—the longer the track record, the better. Industry participants who have not yet embraced this new digital culture are well advised to clearly articulate and represent their personal and professional brand online. After all, it is a matter of trust.

1. CFA Institute & Edelman, Investor Trust Study, (2013).
2. Michelle Cull and Terry Sloan, “Characteristics of trust in personal financial investing,” Financial Planning Research Journal (2016): 10. 
3. CFA Institute & Edelman, Investor Trust Study, 4. 
4. Cull and Sloan, “Characteristics of trust,” 10. 
5. CFA Institute & Edelman, Investor Trust Study, 5.   
6. Cited in CFA Institute & Edelman, Investor Trust Study, 18.
7. Financial Services Practice (FSP), McKinsey & Company, “The Virtual Advisor: Delivering Personalized Advice in the Digital Age” (June 2015), 4. 
8. FSP, McKinsey, “The Virtual Advisor.”
9. Hootsuite Strategy; “Social selling: What it is, why you should care, and how to do it right,” blog entry by Christina Newberry, April 23, 2019. 
10. Nancy Albinson, Sam Balaji, and Yang Chu, “Building Digital Trust. 
11. Albinson, Balaji, and Chu, “Building Digital Trust: Technology can lead the way,” Deloitte Insights, September 23, 2019.