Whom Do You Trust?

IMG_0227Why do so many investors continue doing business with companies that abuse their trust? Almost every week, the Securities and Exchange Commission (SEC) or some other regulatory body announces sanctions, fines, and punishment against large brokers, banks, and insurance companies. Almost every household name brokerage firm is on this list, yet investors still utilize these entities.

Why trust your wealth to firms who have a long track record of being untrustworthy? This question is at the center of the push over the past couple decades to differentiate between those who sell products, (like those on the list), and those who provide fiduciary advice, like our firm. Sure, you don’t have to be here, (since we work mostly with particular types of clients), but you certainly shouldn’t be there.

Webster’s defines trust as “a belief that someone or something is reliable, good, honest, effective, etc.”. We all have “blind spots”, areas where we are “blind” to biases. We might think the person is good even if the firm is not so good. There obviously is a disconnect there since the firm sets the operating standards and creates the culture.

The most crucial inflection point for trust is at the very beginning. Since trust accrues over time, prospective clients have to be able to make reasoned judgments about the presence, or absence, of trust. A fully transparent compensation structure, like that in our firm, enhances trust. An opaque system, like those used by the household name firms, does not further the condition of trust. Ready to make a change? Ready for a real conversation?

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