Greg Harris, Senior Investment Manager in Maitland's London office, ponders on the difference between 'adviser' and that somewhat clichéd term 'trusted adviser', to unpack what it really means to trust someone.

Following a recent panel discussion on family office affairs, I was asked to write a short article on the importance for someone with newfound wealth to find a trusted adviser. As I wrote, I thought to myself that there is nothing fantastically special about being an adviser, so what is it that elevates someone to "trusted adviser" status?

In a world of online scams and email phishing, trust can be a scarce commodity and most clients would balk nowadays at someone using the remarkably unassuring words "trust me". The frustrating thing about trust is that it is earned over time, and there is no fast track to get there.

Trust is not dissimilar to your reputation and as Warren Buffett once remarked:

"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that,you'll do things differently."

I came across an excellent article (read here) written by Christine Crandell for Forbes about trust – she had the following to say:

"Trust means doing what you said you're going to do when you said it'll be done and to the best of your ability."

This goes to the heart of what created the mistrust in the banking and financial services sector – banks relied on their conservative image and were understood by the public to be conservative corporations that would safely guard the funds that were entrusted to them. It turns out that for the most part (there were plenty of exceptions) this was not the case.

When it came time to own up to their after-school activities, it emerged that these banks had not done what the public had expected of them and irrespective of whether it was correct or not,the misalignment of expectations created a complete breakdown of the trust built up over decades. The most recent Edelman Trust Barometer (read here) ranked trust in financial services and bank organisations as the lowest categories other than the media – a continuing sorry state of affairs for the industry.

One of the more interesting and relevant aspects of the Edelman Trust Barometer is that the three highest ranked sectors across the business world, from a trust perspective, were technology, consumer electronics and the automotive industry. Given the revelations over the past month or two with respect to Volkswagen, we would expect to see the automotive industry suffer a sharp decline in the 2016 study.

So what elevates an ordinary adviser into trusted adviser status?

  • Someone who demonstrates competence. There is no substitute for an adequate knowledge base. For a private client or family this needs to span fiduciary, taxation, estate planning and investment.
  • Someone with whom you are able to maintain a relationship and who also possesses technical skills. The Edelman survey found that the informed public were more likely to trust either an "expert" or "person like themselves" rather than the CEO of a company.
  • Someone who is clear in their communications, rationale for decisions and expectation management. An ambiguous adviser or one who sits on the fence is unlikely to achieve "trusted" status.
  • Most importantly, someone who does what is right for clients, rather than what is easy or in the adviser's interest.

For a family with newfound wealth there is no replacement for a trusted adviser. Attempts to "do-it-yourself" often represent a significant burden on the individual family member nominated into the role, and provide a foundation for intra-family tension and disagreement.

The challenge is to find a trusted adviser with whom the family are comfortable. This is no easy task and quite often the relationship aspect is the one which is the greatest hurdle to overcome. Families are full of personalities – it shouldn't be unusual that this is a key requirement!

Our advice? Spend time making your selection. It takes significant effort and planning to sustain wealth throughout generations and the trusted adviser is critical to this process. A poor decision can lead to unhappy consequences.

Originally published on 25, January, 2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.