How to tell whether you can trust an adviser

It’s very important, when choosing a financial adviser, that you find someone you can trust.

However, working out whether they’re trustworthy or not isn’t always easy. The size of the firm, for example, tells you very little.

Herman Brodie is a financial author and consultant who has specialist expertise in building trust-based relationships. 

In this video, presented by Robin Powell, Herman explains what you can do to help you find the right person to manage your finances.

Video transcript: 

Just as you need to trust your doctor, you also need to trust your financial adviser.

Financial author and consultant Herman Brodie is an expert in adviser-client relationships.

Trusting your adviser, he says, will give you much more peace of mind.

Herman Brodie says: “So, if I trust my adviser or I trust my asset manager, the riskiness of the whole enterprise we’re doing together is actually diminished. So my level of anxiety is reduced. 

“Now, a lot of bad things can result when we are overanxious about the engagements we are involved in. And financial markets are fraught with all of the kinds of things that we as human beings find the most disagreeable. And this often leads us to do precisely the wrong thing at the wrong time. 

“Now if we perceive the whole riskiness of the engagement to be reduced because we trust the person who we’ve confided with our assets, then, of course, this brings an enormous amount of reduced stress for clients.”

Sadly, some advisers in the past have proved themselves to be far less worthy of trust than others.

If trust in your existing adviser has broken down, it’s very different to rebuild.

Herman says: “When you get advisers, for example, pushing products that are very expensive when there are cheaper alternatives, or because they are tied to a particular product issuer. Or even in medical professions, where doctors have been seen to be prescribing particular medicines because they are taking kickbacks from the pharmaceutical company. 

“It’s evidence therefore that they are actually not acting in my interests at all, they are acting in their own selfish interests. And this damages the perception of benevolence. And those perceptions are very very difficult to recover.”

Herman Brodie says there are two components to trusting an adviser. The first is a conscious decision: Is the adviser competent? The second is more sub-conscious: Does the adviser have my very best interests at heart? Ultimately, though, you have to trust your gut instinct.

Herman says: “At least with the conscious part of that evaluation, in terms of, you know, the skills and training, and let’s say the fiduciary responsibilities that that adviser takes on board. On paper, that adviser must stack up, so the competence measure must at least be satisfied. But, whether you are going to perceive that person as benevolent or not, it’s largely non-conscious, I cannot tell you how you are going to feel about somebody.

“Who I’m going to be able to be open with is probably going to be somebody different to you. And as a consequence, you just have to go with your gut. There is no secret formula for identifying benevolence. Everybody sees benevolence in a slightly different place."

So, you should choose an adviser who is clearly competent, but also one who will put your interests ahead of their own. Only you can decide if someone ticks both boxes.