As indicated by the recent AMFI data, retail investors have understood the importance of sound financial advice and don’t mind paying for it. About 62% of the assets of individual investors are from T30 cities were brought in by distributors, as on July 31, 2019.

Despite the many direct investment digital platforms that are available and mushrooming in this digital era, banks too are offering Robo-advisory platforms for direct investments. However, investors continue to seek advisers on account of these reasons:

  • Higher costs by banks and certain Robo-advisory platforms
  • Uncomfortable to share data digitally
  • Want clarity about investment products and avenues

What can adviser do to retain and increase their client base?

First, advisers have to prove they are trustworthy to retain a client and grow business through referrals. The Mutual Fund industry faces ethical issues because of several other situations:

  1. Insurance agents pitching insurance products as investment products,
  2. Lack of financial literacy sessions by advisers,
  3. Rampant mis-selling by few advisers, and
  4. Advisers Catering only to HNIs in order to garner higher commissions.

It is seen that the penetration of independent advisers for Mutual Fund business is low as compared to the insurance agents. This is primarily because of the stricter norms the mutual fund industry adheres to, which is of course for the welfare of the investors. But similar norms aren’t imposed to the insurance industry and at the helm is a government body to rescue insurance agents. This has further discouraged the financial advisory business.

[Read: Another Step From SEBI To Safeguard The Interest Of Mutual Fund Investors]

Due to this, the retail investors lack trust as they are unable to distinguish between unscrupulous and ethically sound advisers. But, if investors receive high-quality valuable financial advice aligned to their level of satisfaction and risk tolerance, they will begin to trust financial advisers.

That’s why it is very important for advisers to show effective relationship management skills in order to cultivate trust to retain clients and attract new ones through referrals, based on credibility in a shifting advisory space.

The first step for an adviser, towards building the trust of a prospective client is by being a “good listener”, the more an adviser listens, the more they can focus on understanding the client’s requirements, doubts, risks, and goals. Because investors will be happy to entrust someone who not only understands their goals, but believes that their functional, emotional, and ethical needs were being met.

Based on what the client shares, the adviser must provide meaningful advice, handholding them through the decision making and investment process. Acting in the client’s best interests and on behalf of them whenever permitted to and keeping up with their word; proves that the adviser is a trustworthy person.

Most clients develop opinions early on about their advisers, through simple acts…

  1. Failing to respond to their queries,
  2. Not resolving doubts, and
  3. Not attending phone calls…

All these are looked upon as red flags by the clients in terms of an adviser’s image and in turn unworthy of trust.

A client takes notice of the ethical aspect of how the adviser advocates on moral and fiduciary standards and practices when he acts in the clients’ best interest in a tangible way when necessary.

[Read: How IFAs Can Overcome Hurdles In Their Practice]           

The emotional trust is the most difficult one, but it solely depends on how the adviser tackles their client’s fears during market volatility and keeps their expectations realistic based on financial goal and investment portfolio. The adviser must know how to make their clients comfortable by being a counsellor.

Besides, being available for open communication with clarity and transparency adds more value and better rapport with the client. The adviser’s relentless focus should be on making the clients aware about the accurate details of any fund through research, managing their own time efficiently, framing their advice with the client’s goals in mind, while communicating effectively, helps in developing client’s trust.

Also, an adviser who can develop through customise planning unique investment solutions after identifying each client’s unique situation, their goals and concerns, earns more brownie points by getting referrals.

And if a financial adviser provides a service calendar that provides a timely review schedule to discuss the client’s investments and provide other value-added services, like research reports or tools, can also be helpful.

For advisors to nurture and deepen their client relationships, it’s essential that they understand the foundation on which trust is built. In the advisory industry, “TRUST” is the integral core- built on the foundation of integrity.

[Read: How IFAs Can Gain the Trust and Respect of Their Clients]

As a credible adviser, fostering trust requires devoting time for clients initially will reap substantial rewards for you in the form of higher client retention and referral rates in the long term.

End notes:

  • As an adviser ensure to continually earn the honour and privilege to work with the client by never faltering in delivering what you’ve promised and have been providing.
  • The key to managing expectations, especially those that may be unattainable, is by consistently demonstrating to them the value you provide as their adviser and rectifying any unrealistic expectations.
  • Investors expect you to be transparent, follow the best disclosure norms, and hope for confidentiality.
  • Furthermore, they expect you to understand their needs so they can receive ‘personalised’ prudent advice.
  • Cultivating client’s trust is a time-taking process based on ethical advice, fiduciary standards to place the investor’s/ client’s interests above your own will help you gain the client’s trust.

As an investment adviser, it is imperative to distinguish yourself from the crowd as a trustworthy person by providing honest and ethical advice and by adopting the best business practices of high fiduciary standards.

Douglas Adams, an English writer, humourist, and dramatist once said, “To give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.

Editor’s note:

We have launched CFG with the objective to solve the biggest and most common challenge faced by both the industry and the investment population at large—the complete lack of the ‘Trust’ factor. This has been the biggest leap we have possibly taken.

CFG aims to provide you with expert research & training material, insights on best performing funds, special financial planning tools and a lot more!

If you want to be a credible adviser register here now!

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