The mechanics of trust between people and between people and organisations are not a secret. There is more than 200 years of research about the psychology of it, and since the development of decent brain imaging we can actually point to the parts of the brain that the emotions of trust and revenge live in.

But that’s not the point of this article. The point of this is that the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has shattered the broad trust that Australians have in banking and financial services. I know this because I research it.

Like you, I knew the royal commission was coming, so I organised some of the very clever young researchers in my team to design a survey to track how much Australians trusted their bank and their financial planner. The first survey occurred before the inquiry started and showed that by and large Australians trusted their banks and their planning businesses.

If I simplified the data for the purposes of this article, banks in general were an eight-out-of-10 for trust (strong trust) and Financial Advice about a six-out of-10 (mild trust).

Here’s the kicker on this. If you ask this question not about financial advice generally but instead about someone’s financial adviser specifically, the numbers leap, to nine out of 10 – very strong trust.

But those numbers have started to move. This quarter we didn’t ask about their financial planner – just about their financial advice brand – and the numbers are down. Bank brands are now running at six out of 10, and financial advice brands are down across the board.

If you want a copy of the research email me at [email protected] and I will share it with you

This is bad news, and here’s some slightly worse news: there will be more to come. The royal commission will likely be extended and will turn its attention to insurance and superannuation.

But that’s good, right? If you believe in this industry and you want it to succeed then driving out the bad practices is important. If we can’t be strong enough to lead good practices ourselves then we should expect the changes to be made to us.

No honest participant will be harmed in this enquiry. Scratch that; very few will be. I watched the royal commission last week and I saw people having their reputations trashed for things they didn’t do and for systems they didn’t control. They have become the face of punishment, while the masters of the wreckage they inherited have moved on.

If you are getting this email it means you work in financial planning and you are on my email list which, and that means that you have answered a survey from me, or have attended a conference I have spoken at, and you are almost certainly a financial adviser working hard every day to help your clients achieve their best possible life.

Here are two things that I can prove:

  1. If you have a close relationship with your financial adviser you will be richer than someone who doesn’t have a close relationship with their financial adviser.
  2. If you have a close relationship with your financial adviser you will be more confident about the future than someone who doesn’t.

I have done 19 years of research on success in financial advice and how trust works, so I wanted to share a little bit of what I know.

First, the bit about financial planning

You are a change agent

A good financial planner transforms people’s lives. By meeting with you and working with you they will move from a relative state of financial chaos to financial certainty. There is in the life of every one of your customers a time before they met you and a time after they met you – a time before chaos and a time after chaos.

Remember that. If you are doing your job properly then you are fundamentally transformative in the lives of your customers.

About 10 years ago I did a piece of work in which I interviewed 100 people asking them about the good decisions that their financial planner had helped them make. The stories were completely inspiring.  The company that commissioned it, AXA, no longer exists in Australia, but I’m sure most of the planners, and the peoples whose lives are better, do.

The investment portfolio isn’t the magic

There is very little magic in the investment market. What good financial advisers do is act like a coach. They teach people to invest their money, not spend it; they keep costs down; they choose good insurance; they keep the records together; and they manage the relationships better.

Good financial advisers are the gods of small changes. They don’t make people suddenly wealthy, they make sure that they do the best they can with what they have.

If you think that helping people do the best they can with what they have is easy then you don’t have children. Done properly it’s hard and grinding work.

So it’s not the investing that is magic. No one can outplay the market. It’s the discipline that’s magic. It’s knowing that thousands of small changes make a real difference. It’s about having a plan and sticking to it.

Now the bit about trust

Here’s how trust works. Trust me, this is a coarse-grained definition, but it will do for today (and if you want to know more, email me and I will send you stuff to read and generally talk your ear off about how this works).

Trust behaviour is a stack of overlapping ideas which occur in this order:

  1. Benevolence: acting in the best interests of a person;
  2. Competence: how skilled the person you are working with is;
  3. Control: how much they can control the environment; and
  4. Authenticity: are you who you say you are?

That’s it. That is, broadly speaking, how trust works.

Think about what the royal commission has been unpicking. The businesses have not been acting in your best interest, they appear incompetent, they lack control of their systems and they are completely inauthentic.

So here’s five things that you need to do right now.

  1. Segment your clients. Work out who you need to talk to in order of priority and why you need to talk to them. There will be different drivers. Some will be worried about money, some will be worried about not understanding what is going on and some will be worried about you. The reason you need to segment them is because they don’t all have the same need, if you send them something broad it will look like you don’t care. If you can, call 10 clients a day and just ask them what they think and if you can help. It generally takes about 90 minutes to do and it is surprisingly powerful.
  2. Communicate with all your clients. But choose a method carefully. For people that need it, call them. For everyone else, send them a personal email. If you don’t have an email for them, send them a letter asking them to call you. But don’t send them a group email or group letter which says, “Dear Customer (or Shareholder, or Whatever)”. They chose you. They trust you with their money – respect that.
  3. Tell them very clearly that you know what’s going on. Tell them that you care very much about it and remind them about the services you provide for them and encourage them to call you and make an appointment if they have any questions – and that you will see them as soon as you can.
  4. Build a one-page paper on how you add value to your clients and how you charge for it. Have the data ready. If you can’t, and if it looks like you lack control and are being inauthentic, it looks like you’re hiding something.
  5. Be prepared for people to be angry and irrational. When that happens, be absolutely professional. Look, let’s talk like professionals for a second. Just between you and me, financial advice is an industry in transition. We are going through the awkward teenage years of going from loose guild of people working in a mix of methods and charging processes to a fully fledged profession. This takes time and it takes discipline and it’s going to be hard. Now is the time for you to act like a professional, to talk like a professional, and to treat everyone else with respect.

So the rules are clear. If we want to rebuild trust and to be regarded as a great profession we are going to have to act like one. Act only in the best interest of your customer, train yourself and your team to be highly competent, learn how to control what you can of the market and always be authentic.

Let’s not lie. The period ahead will be hard and, frankly, worse is to come.

But to every honest, hard-working financial planner out there: have courage – this too shall pass. Your job done properly transforms whole families for the better.