Women and financial professionals: Why should she trust you?

Mary Quist-Newins, CLU®, ChFC®, CFP®

As the State Farm Chair in Women & Financial Services at The American College, Mary is also the author of Women and Money: Matters of Trust.

Trust busters

There has been a great deal of buzz lately in our industry among regulators and in the popular press about the trustworthiness of financial professionals. Almost daily, it seems we witness ever-increasing scrutiny by regulators while the media exposes the unsavory and abusive business practices of our industry's "bad apples." As a result, there has been recent movement towards implementing controversial new regulations and fiduciary standards by the Securities and Exchange Commission, Financial Planning Association and Certified Financial Planner Board of Standards.

The upshot of these developments is a challenging environment for both consumers and producers of financial services. Since women frequently experience greater financial challenges and rely more on financial professionals than men, the negative consequences of compromised trust are more acute for them.

Unfortunately, the majority of American women do not trust financial advisors and insurance agents. In State Farm's 2008 "Musts of Trust" survey, less than half of the women surveyed (44 percent) indicated they trusted insurance agents. For financial advisors and stock brokers, the results were even worse - with just about one in three (36 percent) indicating trust. These findings are even more disappointing when compared to trust levels for medical doctors, where 79 percent of women said they trusted physicians.(2)

The building blocks of trust

The financial services industry must improve its tarnished public image. What can the medical profession teach financial services professionals about creating and maintaining trust?

It boils down to three fundamental elements that are nearly universal among medical doctors: assessment, ethics and education. (I say "nearly" universal, since we all know that there are "bad apple" physicians, too.)

Assessment

In order to prescribe a course of action, the physician must first, diagnose or assess the patient's physical condition. This includes a thorough fact-finding of medical and family histories, along with an exploration of the client's health issues and symptoms. The diagnostic process begins with careful inquiry and should result in an understanding of the patient's ailments.

Many women feel that this deliberate process of discovery is often overlooked or incomplete when it comes to working with financial professionals. Women frequently cite that they do not feel listened to or respected by financial advisors. In recent research by the Yankelovich Monitor, 84 percent of women respondents said their investment advisor did not understand their investment objectives. (3) (Assuming these perceptions are accurate, one wonders how required suitability standards can even be met.) Furthermore, 55 percent of the affluent (arguably, the most attractive prospects/clients) women respondents indicated that they did not feel as though insurance agents respected them as much as their male clients. (4)

These diagnostic and relationship building gaps seriously compromise a trust relationship from the very start.

Moving beyond diagnostics, there are gaps and inconsistencies in industry ethical standards as well. What follows is one of the most striking lessons we might learn from the medical profession.

Ethics

While our vocation is relatively young, the practice of medicine is centuries old with well-established ethical standards. Many of the same concepts embodied in that ancient code of ethics, the Hippocratic Oath, are still applied today. These standards are codified in the current nine principles of medical ethics adopted by the American Medical Association. Most significant among these principles are the responsibilities to the patient's best interests -- first and foremost -- and the obligation to apply competent medical care.

By contrast, there are many codes of ethics in the financial services industry, some relatively simple and others extremely complex. Almost every major producer organization has its own standards. For those who hold advanced designations, there are yet more principles to which one must adhere. For the most part, these codes and principles bear a striking resemblance to each other.

Perhaps part of the problem with our trust image is that we do not come together as an industry to offer and promote a common set of ethical standards. I believe it is very likely we will see this change in the coming years as a result of more uniform industry standards, regulatory requirements and/or consumer demand.

An example of an industry standard for anyone practicing financial planning (which I interpret as any financial plan, insurance and/or investment "producer," fee or commission based) is contained in The American College Professional Pledge and its Ethics Canons.

The professional pledge applies to all Huebner School designation graduates including Chartered Financial Consultants® (ChFC®) and Chartered Life Underwriters® (CLU®) and is a variation of the Golden Rule. It states, "In all my professional relationships, I pledge myself to the following rule of ethical conduct: I shall, in light of all conditions surrounding those I serve, which I shall make every conscientious effort to ascertain and understand, render that service which, in the same circumstances, I would apply to myself."

The canons are designed to align professionals' business practices with the ethical requirements of the designation. Included among the canons are the requirements to "conduct yourself at all times with honor and dignity," to "avoid practices that would bring dishonor upon your profession" and "comply with all laws and regulations, particularly as they relate to professional and business activities."

Beyond these guidelines, I'd like to believe that we all seek to be ethical in managing conflicts of interest and the disclosure of material facts. However, a little self-examination from time to time is both worthwhile and illuminating.

Education

Lastly, within the ethical application of any profession, is the need to build and maintain high levels of expertise, skills and competence. The rigorous education that medical doctors undertake to practice is well-understood by patients. These educational requirements reinforce the public trust.

Compare the uniformity of medical education to our industry's bewildering array. There are a myriad of credentials offered to financial professionals. The American College has identified more than 267 of these at last count. Some require just a few hours of training; others take hundreds of hours of studying and examinations. This "alphabet soup" of designations is not only confusing, but seriously undermines trust.

Beyond the public's confusion on designations lies a lack of commitment to continued learning and professional development among some in our industry. Our business is incredibly complex and changing. It is vitally important that we all work to increase our own technical skills and competencies, and encourage our peers to do the same.

The need

The public need for our help is great. We see an astounding lack of financial literacy and action. These twin dilemmas have contributed in part to the economic malaise in which we now find ourselves. Financial professionals can be a key to a brighter future for individuals and our society as a whole. Studies have consistently shown that men and women save and invest more when working with a financial professional... If only they would trust us more.

You can do your part not only to help your clients, but also to build your trustworthiness and that of your profession, by making the following commitments:
Actively listen to better understand of clients needs and objectives

Understand and apply ethical standards prescribed and required

Never stop learning
Remember: By coming together as an industry on these core elements of trust, we can change the game.

Reprinted with permission from Producers Web. http://www.producersweb.com

(1) Merriam Webster On-Line Dictionary, November 2008
(2) State Farm "Musts of Trust" Survey, Kelton Research, August 2008 (Alison, please verify)
(3) Yankelovich Monitor.
(4) Prince, Russ Alan, and Grove, Hannah Shaw, Women of Wealth, The National Underwriter Company, 2004.