“Can I trust you?” That’s usually a potential client’s first thought when choosing a financial advisor.  According to a recent study by Cerulli Associates, factors related to trust, such as referrals or reputation, are key reasons investors choose a particular advisor.

Trust is fragile; it takes years to build and can disappear in an instant. As a result, most financial advisors put a priority on winning and maintaining the trust of their investor clients.

At the recent Investment Adviser Association (IAA) 2017 Leadership Conference in Chicago, I hosted a breakout session for the leaders of US investment firms about the importance of providing radical transparency and how it can be used to build client trust.

Here are some of the key points we discussed:

Disclosure is not the same as transparency

Regulators require that dealer firms provide investors with huge amounts of “disclosure”. But how much of it do clients actually read, let alone understand?

A good example of disclosure not leading to transparency is this year’s CRM2 reports. Despite the fact that investment fees are now laid out, in dollars, in these reports, only 23% of Canadian investors surveyed in a recent J.D. Power study said they understand the fees they pay to their financial advisors.

Simply providing information is not enough to ensure investor comprehension; especially if the information is complex or lengthy.

Disclosure is required by regulation; transparency is a choice to help clients.

Investors want to receive key information about their investments in a way they understand. I like to refer to it as “radical transparency”. It’s the notion of truly understanding what matters to your clients, and providing the key pieces of information they want in a way they can easily and fully understand.

It’s about going well above the regulatory requirements for disclosure, and clearly communicating the few things that clients want and need to know. Advisors who adopt the notion of radical transparency can more fully educate and engage their clients, which results in building trust.

How transparency builds trust

According to a recent Ernst and Young global wealth management survey, “Transparency of performance and fees is the top driver of client trust.”

Transparency of performance and fees is the top driver of client trust.

Perhaps surprisingly, once you clearly and effectively disclose the fees that clients pay, studies have shown that, rather than scaring off your clients, their trust and confidence levels actually go up. Clients appreciate the honesty and transparency.

Transforming client communications through transparency

In an Edelman/CFA Institute global survey of what investors want, five of the 11 “essential” attributes that are important to investors when working with an investment firm relate to transparency and open communication.

Investors crave understanding and clear communication about their performance and fees, in particular. They want easily digestible information about their investments that goes beyond required boilerplate disclosure and provides meaningful transparency and clarity.

By adopting a radically transparent approach to client communication, informed by a clear understanding of what clients want, advisors have the power to reinforce confidence and grow their business.


Is your firm committed to transparency for your clients? If you’d like an objective review of your approach to transparency and client communication, feel free to get in touch with me at 416-598-1241 x262 or susan.silma@purefacts.com.

Want to find out more about radical transparency for investors?
Check out our blog: CRM2 was a start, but are investors really getting the message about fees and performance?

Practice Leader, Client and Industry Strategy