blog

Investor to Financial Firm: How To Earn My Trust

by Eric Daugherty

A colleague whom I met recently is thinking of starting a web-based business aimed at young investors. She asked me how to build a "trusted" brand. This got me thinking about what investors would say to financial firms regarding building trust. Here's what that would sound/read like.

Dear Financial Firm, Advisor, or Broker,

There is a lot of noise in my ears from talking heads on TV, market updates, friends at the water cooler. It is hard to know whom to trust. I want to trust you. I need to trust you. There are very few people I need to trust . Trust only matters if:

• We're dealing with something important; and
• I cannot easily and quickly verify the value proposition I receive over time and ascertain whether I got a good deal.
• In other words, I only really need to trust my wife/husband, my doctor, the folks who made my car, and my financial provider.

The good news is that earning my trust is easy. Aside from the obvious aspects of a customer/provider relationship that are givens (answer my calls, do not make errors on my account), here is what will engender my trust:

1. Be clear on what I get for my money. How much do I pay and what does it buy me? What is the value proposition in plain English? I am a smart person in my field, but that field is not finance, so talking about basis points, double reverse inverted ETFs, and straddles based on the VIX just makes me feel overwhelmed. Help me understand what I will pay, in dollars, for what I receive.

2. Tell me how you make your money. Shed some light on your incentives. I am suspicious unless I understand what's in it for you. I don't mind paying a fair price and you deserve to make a profit. If you charge more than others, tell me why. What is different about your product or service that warrants a higher price? If you don't share this information, I will presume that you are hiding something.

3. Don't play with the truth. Burger King sells me on taste and convenience. If they tried to tell me that my Double Whopper with cheese was good for me, I would be angry. If Walmart tried to convince me their clothes were high-end, I would not trust them. Yet brokers try to convince me that I need to trade stocks to make money, and closet index funds try to charge premium prices with no additional value provided to me. If not dishonest, this is at least disingenuous.

It's as easy as that. I want to trust you. Tell me the truth. Explain in plain English what I get for my money and what's in it for you. Serve me well, and I will be your loyal investor for years to come.

Sincerely,
Joe or Joanne Investor