FASEA’s Code of Ethics commences 1 January 2020 and is underpinned by five (5) values – this is a guide to trustworthiness. From that date, all ‘relevant providers’ (advisers) are required to act in a way that demonstrates, realises and promotes trustworthiness (along with the other 4 values).

The government and relevant regulators have made it abundantly clear they are responding to the Royal Commission findings for the principal purpose of improving the level of trust and confidence the community has in the financial advice industry. These critical outcomes are closely intertwined – it’s difficult to generate confidence in anything without first establishing a suitable level of trust.

So, one of the first and most critical issues a client will seek to address in their relationship with an adviser is the issue of trust. Can you demonstrate that you are worthy of my trust? Will you act in my best interests at all times and place my personal and financial interests before your own? If I can’t trust you, why should I do business with you?

A Definition

Our definition of trust is that it is the degree of confidence that a prospect or client has that their adviser can be relied on to fulfill their commitments, be fair, be transparent, and not take advantage of their vulnerability.

Information asymmetries will always exist between a client and their adviser because the adviser will usually have more information at their disposal relative to the advice topic being addressed. So, a prospect or client anticipates that you will not engage in unexpected behaviours, irrespective of their ability to monitor or control your activities.

FASEA’s Perspective

“Acting to demonstrate, realise and promote the value of trustworthiness requires that you act in good faith in your relationships with other people. Trust is earned by good conduct. It is easily broken by unethical conduct.

You earn trust by being reliable in your relationships with others, and by doing what you say you’ll do. Trust requires having the courage to do what is right, even though you may suffer personal detriment by doing so. It requires that you are loyal to each of your clients and that you keep client personal information entrusted to you private and confidential. It requires that you should not subordinate your duty to your client, or your client’s lawful interests, to your own interests and any obligation you may owe to a third party, including an employer or a financial services licensee.

Trust requires you to act with integrity and honesty in all your professional dealings, and these values are interrelated.

Acting ethically, with trustworthiness, promotes trust by consumers in the profession of financial advisers, promoting community confidence in accessing and utilising professional financial services.”

Please note that trustworthiness isn’t a standalone value – it is informed by and interacts with other values such as integrity and honesty (the latter being one of the other four values underpinning the code). In the extensive research we’ve undertaken over many years, we have isolated a number of relationship variables that are responsible for >75% of the variance in the trust score.

As you will know from your own experience, trust can take quite a bit of time to develop, however, it can also be destroyed very quickly through unthinking actions or omissions. Everything you do in the conduct of your business needs to be seen in this context. Trust is earned over time through consistent good conduct, undertaking regular reviews of each client’s circumstances, educating them along the way and through ongoing quality communication.

As we’ve been collecting data from clients of advice businesses for some time, we know for a fact that trust is highly correlated in a positive way to how much clients value their relationship, the extent to which they are prepared to forgive when things don’t go to plan (and this will happen), whether they are likely to remain a client and whether they are prepared to refer you to their friends, family and work colleagues.

The implications are very significant. The higher the level of trust you can achieve with clients, the more likely they are to value you and your advice (think value for money), forgive you, stay with you and advocate for you – all highly positive outcomes for an adviser’s career and business.

Some Practical Suggestions

Start a checklist

As you consider what can be done to prepare for life under the code, you could think about using a checklist of questions relevant to your dealings with prospects and clients and use the checklist to guide your actions. Here are a few suggestions about what questions to include on your checklist.

    • Will I derive an inappropriate personal advantage if my client accepts my advice recommendation(s)?
    • Have I disclosed any actual or potential conflicts of interest to my client during the advice process?
    • Did I apply a high level of relevant knowledge and skills when advising my client?
    • Will my advice put my client in a better financial position?
    • Did I act in my client’s best interests at all times?
    • Did I take reasonable steps to meet all my commitments to my client?
    • Was I open, honest and frank in all my dealings with my client?
    • Did I keep client information private and confidential?
Take action

It’s also important that you take action to demonstrate your trustworthiness, and here are a few practical actions you could consider to improve the level of trustworthiness.

    • Think about how you treat colleagues and family because this is likely to be mirrored in your treatment of clients (the ‘golden rule’ – do unto others as you would have them do to you)
    • Transparency in everything you do will establish or repair trust fast. Ask yourself if you are withholding information that should be shared with your client and why. Err on the side of disclosure. Don’t have hidden agendas and don’t try to hide information.
    • Communicate results. Don’t just talk about what you are going to do for your clients, but make it happen and, importantly, communicate those results so they become tangible in the eyes of your clients. Promises made versus promises delivered. Results give you instant credibility and instant trust. Do what you say you are going to do and deliver on time. Don’t over-promise and under-deliver.

Another important issue to consider is the need to establish clarity around your client’s expectations (what does their version of ‘success’ look like?) and temper that with your ability to deliver. You have to know what ‘success’ means to the client, what they will value from you and whether you can deliver.

P.S. If you missed our earlier posts, they can be accessed at competence, honesty, fairness, and diligence.

Disclaimer
This article was first issued in December 2019 and is point in time content based on the Financial Planners and Advisers Code of Ethics 2019 Legislative
Determination, the accompanying Explanatory Statement and Guidance, together with proprietary research. It does not constitute legal advice. We
encourgae you to seek your own professional advice on how the FASEA Code of Ethics may apply to you. Suggestions in this article are not exhaustive
and are not intended to be binding on the author or related entities. Further guidance may be released by FASEA and may change the suggestions
within this point in time article.

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