What is the worst thing that can happen in a relationship? You’re probably thinking of a million things, but the answer is really quite simple. Nothing damages a relationship more than losing your partner’s trust. Each relationship is different, but most of them flourish when following a few basic rules, and financial relationships are no exception; gaining investors’ trust can be a lot like dating. 2019 marks the 11th anniversary since the 2008 financial crisis. Since then, a new generation of investors and a new generation of investing technologies have dramatically changed the nature of how asset managers build trust.
RULES OF DATING YOU MUST TAKE IN TO CONSIDERATION TO GAIN INVESTORS’ TRUST:
Understand their needs and fears: Communication is key. Awkward silences are everyone’s biggest fear when dating and lack of communication has killed relationships like a viral disease. Making an effort to understand your partner and learning your clients’ needs and fears is key when building trust. As explained in Financial Times, “offer products that clients need rather than the ones managers have, avoid unrealistic claims about returns, offer proactive investment ideas and elicit regular client feedback.” Happy couples usually help each other grow by working together as a team. Investors will prefer working with someone who shows willingness to improve their investment capabilities: “Such engagement typically produces new ideas, manages expectations, raises awareness and avoids panic buying and selling.” To gain credibility, share Global Market trends with them that might be of interest. As investors become more savvy and seek optimal returns, there is more scrutiny and interest being placed on creating and maintaining a globally diverse portfolio, for a myriad of reasons. Fund managers must be able to share key insights that provide clients with the best returns possible; sharing this information and ensuring that investors understand the underlying dynamics, shows investors that you are the right partner to help them grow and diversify their assets and portfolios.
Show ‘em that you care: Never underestimate the power of gift giving. Love letters and flowers seem old-fashioned but going that extra mile to make your partner smile never goes out of style. If you’re wondering whether or not you need flowers to gain investors’ trust, there answer is not necessarily. Instead, think of investing in technology. People trust technology; “Investors of all ages and regions want more technology applied to investing, and trust in technology is generally high”. Technology facilitates trust amongst millennials and genz investors, but every demographic is increasing their use of technology over time. “Developments like blockchain could accelerate the pace of change, and through a distributed transparent ledger, trust in the system could be strengthened by reducing reliance on counterparty organizations.” According to the report mentioned above, “a majority of institutional investors think blockchain has this potential to increase trust in markets.” As an asset manager, in addition to providing great returns for your clients, more and more managers and platforms are being increasingly utilized by investors because of the simple and direct access to an array of investment opportunities, not just a single vehicle.
Show ‘em who you are: A trusting relationship requires seamless communication. In a real-life relationship you get to know your partner slowly over time but it’s also important to open up to show them who you really are. Being vulnerable isn’t easy but it can make a huge difference when building long-term relationships. Clients will appreciate honesty and transparency in every aspect, including fees and business practices. It’s also important to show clarity regarding security and conflicts of interest. According to the report mentioned above, showing integrity is one of the most important factors to gain investors’ trust: “strong ethics and client-centric focus, such as empathy and loyalty in putting clients first, are the values needed by an investment professional or organization for trust to be granted.”
Contrary to what the plot of your favorite rom-com, relationships won’t just blossom magically. Most of the time they require a lot of patience and investment from both sides to make it work. Let’s say it requires a lot of love from both sides. In the world of financial services, and more specifically, investment services, investor’s trust is both critical and fragile, due to an unfortunate number of scenarios that purposely took advantage of investors and exploited their trust. As a result of this volatile relationship, asset managers have to work significantly harder to ensure they have established a solid foundation of trust with their investor clients. It’s important to also note, that it doesn’t take much for investors’ trust to diverge. Investors’ attention work a lot like Tinder, however, it’s also why it encourages managers to try harder to build a solid foundation with them. Younger investors (Millennials and GenZ) are more trusting of financial services than older ones are. A global survey on the current state of investor trust found that overall trust in financial services is slightly higher: “Among the key takeaways from the survey, we found that clients consistently rank trust as the biggest differentiator in hiring an investment firm.”
Investors’ trust is one of the most important elements of success throughout the competitive and always changing investment industry. Creating a professional environment that includes factors such as credibility, transparency and use of the latest technology available will surely create the trustworthy space investors are looking to work in. Asset managers working with these qualities will surely be able to write a happily ever after story in the financial world.