February 25, 2012


prescription for trustFinancial services is still the least trusted sector on the planet (Edelman Trust Barometer 2012) but that’s where I work. Maybe that’s why I think about ways to help you spot trust. My definition keeps evolving. I thought I had the foolproof measure of trust in Nov 2010 ... but got fooled. Here is the latest — and ideally final — prescription.

Original (Feb 2007)

I first thought trust consisted of Chemistry and Credentials. Here’s why.
This is the instant snap judgment which Malcolm Gladwell discusses in Blink: The Power of Thinking Without Thinking (official website).

If you don't like the other person (let's say an advisor), why would you use their services? You usually have other choices. There's little point giving your tough-to-earn money to someone you don't feel good about.

Successful salespeople are masters at creating chemistry. That's an important skill in today's competitive world. That doesn't mean they can do the actual work. If they delegate, you might get stuck with someone you didn’t select and wouldn’t like.
Mastery takes time and deliberate practice. This is the "10,000 hour rule" from Outliers (Malcolm Gladwell).

Ultimately, you're paying to get something done. The work takes skill. That’s why a handyman is cheaper than an electrician or plumber. You can get the basics done but that might not be good enough since complications can arise during the process. More duct tape, please. If you don't value skill, you might as well trade down to the lowest price. Otherwise, you may trade up for quality (see getting what we want by distorting our spending).

Credentials could come from experience rather than diplomas or certificates. Yet formal learning shows a commitment to go through a rigorous (boring) process. That's an accomplishment. You needn’t learn everything in courses. Einstein said, “Education is what remains after one has forgotten everything he learned in school.”

Once you learn to learn, self-study is an excellent option. The results are more difficult to measure. Without discipline and monitoring, it's easy to get sloppy.

For instance, I became an actuary through a formal process of accreditation and apprenticeship. I now learn through self-study (mainly audiobooks, videos, books, magazines, blogs).

Version 2: Generosity (May 2010)

From working with advisors, I saw that Chemistry and Credentials were not enough. Advisors could be greedy and secretive. They wouldn't share what they knew. Upon digging, I'd often see they didn't know much (and were afraid of getting found out). Or they were afraid that competitors would steal from them. That's odd since they probably “borrowed” the ideas they claimed to have originated. I saw an example just days ago.

Trust required more. How about adding signs of Generosity. The formula becomes Chemistry, Credentials and Generosity.

Advisors who freely share the best of what they know show
  • an abundance mindset (rather than win/lose scarcity thinking)
  • continual learning (dated thinking shows)
  • better knowledge (since teaching is an ideal way to improve learning)
Social media gives free tools to share text (blogs), voice (podcasts) or visuals (video). Advisors with the desire to share can.

Let’s Get Real (Nov 2010)

I came across a two element definition: trust is Expertise and Intent. That's from a book called Let's Get Real by Mahan Khalsa. If you take Chemistry as an essential starting point, this formula looked fine.

In essence, Expertise means Credentials. Intent means showing that you're acting on your clients best interests on an ongoing basis. That's like Generosity.

This definition isn’t quite right either. It's better to make Chemistry an explicit requirement.

The Missing Element

Congruence is the missing element. It means, consistency, walking your talk, having no flaws of character, above suspicion, passing the "smell test", harmony.

We've been fooled so many times (at least I have) that we're sensitive to incongruity. Children are masters at detecting hypocrisy. Try telling a child to eat broccoli when you won't. Or to stay away from drugs when you can't function without coffee after coffee. Or to get off the computer when you're plopped in front of the TV for the rest of the evening.

Generosity and Intent are elements of Congruence but they aren't enough. For instance, an advisor on a nonprofit board looks generous but be hovering there to get business. A diabetic may lack the self-control to resist dessert, which may signal compromises elsewhere. If they break promises to themselves, would they remain true to you when times get rough?

The New Prescription (Feb 2012)

Here's the new definition of trust: Chemistry + Credentials + Congruence. Trust is at the intersection of
  1. Chemistry: how do we feel about them initially and over time? Salespeople excel at building relationships and are not burdened by fiduciary responsibilities.
  2. Credentials: do they have the technical skills to do the work? They may not be current in the newest developments and you might not know.
  3. Congruence: do the clues show that your interests take priority. Look for ongoing generosity and advocacy.


Think back to when you've been fooled. Would the new prescription for trust have helped you?


Podcast 157

direct download | Internet Archive page | iTunes

PS How would you improve the new prescription?

February 18, 2012


better than log
The global 2012 Edelman Trust Barometer ranks financial services at the bottom again (even worse than banks). In this environment, how do you know if your financial advisor is looking out for your best interests?

The same study shows that social media has had a dramatic 75% increase as a source of trusted information. Granted, the base was small but that’s a major increase.

Blogging is an excellent way for advisors to continually show they're on your side. Does your advisor have a blog? If not, why not?


Here are some questions to ponder.
  1. When did your advisor’s blog start? [Why not earlier?]
  2. How many posts are there? [Why not more?]
  3. How often are new posts added? [If less than weekly, why?]
  4. When was the last post published? [If more than a week ago, why?]
  5. Does the content educate you or sell to you?
  6. Who writes the content? [If not the advisor, why?]
  7. Is the content worth reading? [If not, why?]
Advisors continually look for more clients — even they claim to work “by referral only”. Blogging is a way to stand out.


I've been telling advisors to blog since mid-2007. They have many excuses for doing nothing. Three of the most common are: not allowed, no time and not able to write.
Not allowed
Large organizations rarely permit advisors to express opinions in public without pre-approval ... and maybe not even then. Policies can prevent online activity like posting links to articles, expressing opinions in groups or leaving comments on blog posts. Internal restrictions might even ban testimonials to outsiders on LinkedIn.

How bland.

Since bland doesn’t bring ka-ching, the organizations leave a loophole. Advisors are allowed to make questionable claims in seminars and meetings. Why? There's no proof of what took place. It's easy to claim that what you inferred, they did not imply.

Advisors who want to express themselves and show they put clients first could leave and start their own businesses. If that's too drastic, they could go through the process of getting their content pre-approved. While the results may look boring and generic, they can still do something.
No Time
Advisors make time for what matters to them. Shouldn't that include clients?
An advisor who doesn't have time might be unproductive. That's where Pick Four or other programs help. Perhaps the advisor's business has grown and requires more staff. That's a good situation unless the problem is retaining staff.
Can’t Write
Not everyone can write but they can learn. It's not as if we were born walking, talking or cycling. Written communication skills are essential and well worth mastering. Nothing bad could happen from improving. Help is available.

Excuse Busters

How do you explain amateur financial bloggers? They could use the same excuses as advisors but found solutions instead. They have the additional handicap of being outsiders. They need to spend time learning before they know enough to tell you. An insider has a huge edge.


This month marks my fifth anniversary of blogging. That's over 500 posts and 250,000 words. I had no training and “talent” is a myth-conception. We learn by doing.

I’ve been encouraging advisors to blog since 2007. I thought that advisors with the courage to share valuable free content on a regular basis would learn how and stand out. In return, they’d attract more clients, retain more clients and raise standards for laggards.


Podcast 156

direct download | Internet Archive page | iTunes

PS What do you think about advisors blogging, podcasting or creating video?

February 11, 2012


take the money and run?
Once we got a flat tire on Highway 401 at night. We got towed to a tire shop that the tow truck operator recommended. Did he receive a financial incentive?
While site-seeing in India, our driver took us to see silk comforters at a particular store. Did he receive a financial incentive?


When you go to an Apple store, you won't get advised to buy an Android tablet. You already know this. You wouldn't expect a bias at a place like Best Buy which sells both. You'd be annoyed if you found out that hidden inducements came ahead of your best interest.

When you’re referred to someone else for help — accountant, lawyer, coach, investment advisor, insurance advisor, financial planner, plumber — could hidden incentives bias the recommendations?

Some networking groups expect members to refer prospects to each another. This requirement may not be visible or disclosed. This is also a reason to be skeptical of testimonials on LinkedIn, but there spotting overlaps may be easier.

Financial Services

In financial services, there are many one-stop shops — perhaps where you bank or invest. They offer everything except carpet cleaning. That’s convenient for you and more profitable for them. However, your results might be suboptimal compared with hiring independent specialists who are good enough to have their own brands.

See Spot Run

Asking questions like these helps you uncover biased referrals.
  1. Where would you recommend I go?
    If they can't or won't recommend anyone, be wary since they lack courage. A list of options falls in this wimpy category. If they say they're recommending the best place, be wary. “Best” may mean for them ...
  2. Where else have you recommended that others go?
    You may find that referrals keep going to the same place. This is especially true in a one-stop shop. There are probably much better choices outside but only internal referrals are allowed.
  3. How long have you known them? How did you meet? Why did you select them?
    Here the goals are to find out about the depth and nature of the relationships.
Ask in a conversational tone. The answers and delivery will help you gauge the value of the advice.


In some situations, hidden incentives may influence the recommendations you get. As a minimum, there are probably cross-referrals: I'll recommend you if you recommend me. Money might change hands. This is more likely in smaller organizations. The bigger places are more likely one-stop shops, which has other drawbacks. Even if you're informed about the payments, there may be an element of bias in the recommendations.

You may be comfortable with referral fees (or "affiliate marketing") as long as the payments get disclosed clearly ... in advance ... without you asking.

Recently, I've been looking for better ways to back up my data online. Some providers got glowing reviews but mainstream sites never even mentioned them. Maybe some incentive is affecting the recommendations?

The Fairest Way

At their core, referrals are fine. You probably give them already. If you know a good advisor (for example), why wouldn’t you send a friend or acquaintance to them? You all win.

You know your own motives. When you receive referrals, be wary. Even when you think you trust the source.


Podcast 155

direct download | Internet Archive page | iTunes

PS Have you been fooled in the past?

February 4, 2012


red-green apple 500x525A log by any other name is still a generic section of wood from a tree. How do you sell that? You need the power of marketing.

Salespeople like having an edge like exclusivity or innovation to stand out from their competition.

The consumer world places a premium on the exclusive or innovative. The special edition. Limited quantities. Get it first.

In the financial world, deviating from convention has consequences. We already looked at the risk of financial innovation (podcast 142). This time, we’ll explore the lure and allure of “exclusive” strategies using examples from the world of insurance.


Advisors like wrap product configurations into packages called strategies. For instance,
  • the family cottage preserver: use life insurance to pay the capital gains tax due upon the death of both parents
  • the retirement asset conserver: use life insurance to pay the tax on RRSP savings at death
  • the investment multiplier: instead of investing in interest-bearing investments, buy the biggest death benefit possible
We looked at the top five insured strategies earlier  also how to turbocharge them by adding investment leveraging. Different companies will have their own names. Some advisors create their own names too. While the name may not be available anywhere else, the exclusivity is an illusion.

A Rose

A rose by any other name would smell as sweet
— William Shakespeare
When you buy a strategy, you ultimately get a normal life insurance policy from one of the few insurers left (ideally one good at keeping promises). You could buy the identical coverage without a strategy. When you receive annual statements from the insurer, you rarely find references to the strategy.

Advisors may be unable to show you how the strategy works when it matters most — years after you’ve bought. There's little incentive to service policies already sold unless there's a good chance of selling more insurance. Also, the tools are designed to make the initial sale. Later, when real life interferes with the alluring projections, there isn’t much help available.


While a strategy may look unique, the tools used often come from an insurance company or third party. This means that other advisors can often produce the same results.

This is good.

Strategies rely on numbers which depend on formulas and assumptions. Mistakes are easier to make than spot and correct. Even mainstream applications like Windows contain bugs. Your advisor won’t have the resources of Microsoft.


How advisors fool you (and what you can do) [click to read]Who says that what you're seeing is one-of-kind? Besides the salesperson and their team.

Steve Jobs was able to draw people into his Reality Distortion Field and have them believe that whatever he was then promoting was the best thing ever. Your salesperson may not have quite the same charisma but there are parallels. We want to believe. We want to feel special. That makes us vulnerable. What if you’re being fooled?


Ice cream comes in many flavours but vanilla remains the most popular (29%) followed distantly by chocolate (8.9%) and butter pecan (5.3%). You might want to try chocolate marshmallow salsa almond crunch that only one place sells. That’s fine. Go wild.

For financial strategies, do you really want something unique? You might get more peace of mind and better results with the boring and proven.


Podcast 154

direct download | Internet Archive page | iTunes

PS If an advisor asks you to sign a Nondisclosure Agreement, back away.