Financial Advisors Use Digital Marketing To Build Credibility & Trust
Online transparency is rapidly becoming a cornerstone of successful marketing for financial advisors. However, it also presents a unique challenge: investors are increasingly seeking online transparency, while advisors often fear that disclosing too much information could cost them a potential client. This tension forms the crux of a dilemma that many advisors face—how to be transparent enough to build credibility and trust without undermining their own interests for winning new clients.
The Challenge: Building Trust vs. Protecting the Sale
Investors have become increasingly cautious when selecting financial advisors. Many have been burned by false claims, bad advice, hidden fees, unclear terms, aggressive sales tactics, or outright scams, leading to widespread skepticism for the financial service industry.
As a result, investors are less likely to trust advisors who withhold important information, viewing such secrecy as a red flag. On the other hand, financial advisors often resist full transparency, worrying that disclosing too much detail such as fee structures or investment strategies might lead potential clients to shop around or choose a competitor.
This creates a significant challenge: how can financial advisors balance the need for transparency with the need to protect their business interests? The answer lies in “strategic transparency”—being open and honest in a way that builds trust without giving away too much information before the initial contact.
Why Investors Are Cautious
There are really only two types of investors. One is a first time user of financial advisor services. For example, they are rolling assets out of a 401k into an IRA and they need planning and investment advice. The other is the repeat user. They had a bad experience with a previous advisor and are seeking a suitable replacement.
Both types of investors are going to be cautious for the same reason. Their financial security is at stake and they don’t want to make a mistake selecting the wrong advisor.
They want to select the best financial advisor. But, they are faced with a major challenge that impacts their selection decisions. All too often, they do not know how to determine the quality of financial advisors. Even with all of the information on the Internet, they are still prone to selecting the advisors with the best personalities and sales skills.
This creates a need for caution. One result is prudent investors tend to trust what they see on the Internet versus what they hear from advisors. This makes the content on the Internet even more important.
Plus, they can retain their anonymity until they choose to initiate contact with the advisors they find on the Internet. What they see on the Internet determines who they contact for introductory conversations.
The Game Changer: The Internet's Role in Transparency
The Internet has fundamentally altered the marketing environment for financial advisors. This should not be a surprise, because the Internet has had a major impact on the marketing practices of numerous industries, companies, and professionals.
Financial services is no exception. Investors have access to unprecedented amounts of information that can help them make better decisions.
Not too long ago, advisors controlled nearly all the information that prospective clients needed to make their selection decisions. They could shape their narratives through carefully crafted presentations, face-to-face meetings, and selective sharing of information. However, the advent of the Internet has democratized access to information. Investors can now research advisors independently, read reviews, compare services, and even access regulatory filings online.
This shift has made digital marketing transparency not just a best practice but a necessity. Advisors who attempt to withhold information risk losing credibility and trust in the eyes of prospective clients, who can easily find the information they need elsewhere. On the flip side, those who embrace transparency can use it as a tool to build trust and differentiate themselves from less forthcoming competitors.
The Loss of Control: Embracing a New Reality
One of the most significant changes brought about by the digital age is the loss of control over information. Advisors no longer have the sole power to dictate what potential clients know about them. With third-party review sites, social media, and regulatory databases all easily accessible, much of what investors learn about an advisor comes from sources beyond the advisor's control.
While this loss of control can be unsettling, it also presents an opportunity. Advisors can no longer rely on secrecy or selective disclosures to manage their reputations. Instead, they must proactively shape their online presence by embracing transparency where it counts the most.
By taking control of the information they do share—such as their qualifications, investment philosophy, compensation, and client success stories—advisors can guide prospective clients toward a positive perception of their advice and services.
Websites: The Delivery System for Marketing Transparency
In this new digital marketplace, a financial advisor's website is often the first point of contact between the advisor and potential clients. It is also where the battle over transparency is most frequently fought.
Advisors need to ensure that their websites strike the right balance between providing enough information to build trust and withholding sensitive details that could be misused or misinterpreted.
For instance, nearly every financial advisor website will include sections like "Who We Serve" and "What We Do." However, fewer advisors are willing to disclose how they are compensated, and even fewer publish their fee schedules. While withholding this information might seem like a way to avoid scaring off potential clients, it can also create suspicion and lead to lost marketing opportunities.
There is no Substitute for Credibility and Trust
When your business is other people’s money, trust is everything. Advisors must build credibility online to make prospective clients feel secure enough to give up their anonymity and initiate contact.
But, building trust online is no easy feat. It requires a careful balancing act—being transparent enough to earn trust while not revealing so much that it overwhelms or deters potential clients.
Transparency should focus on areas that matter most to clients. For example, showcasing qualifications, explaining investment philosophies, and sharing testimonials or case studies can go a long way in building credibility.
Advisors should also consider the use of visual aids, such as videos or infographics, to explain complex concepts in a way that is accessible and engaging.
Safety First: Earning Investor Confidence
For many investors, especially those new to working with financial advisors, the internet is a double-edged sword. On one hand, it provides a wealth of information at their fingertips. On the other hand, it is also rife with scams and fraudulent claims. This makes it all the more important for advisors to use transparency as a tool for making investors feel safer in their choices.
One way to do this is by clearly outlining the advisor's regulatory credentials and affiliations with reputable institutions, for example, a brand name custodian for client assets.
Advisors should also be transparent about the steps they take to protect client data and maintain confidentiality. However, it’s crucial to balance this transparency with a degree of caution. Advisors should avoid sharing personal information that could lead to privacy breaches or identity theft.
Strategic Transparency: A Competitive Advantage
In a competitive market, the way a financial advisor handles transparency can be a powerful differentiator. Advisors who master the art of strategic transparency—disclosing the right amount and type of information on their websites—can set themselves apart from competitors who either overshare or under-share critical details.
Strategic transparency involves focusing on areas that build trust without giving away so much information investors don’t have to talk to them to learn more.
For example, rather than publishing a full fee schedule, an advisor might provide a description of how they are compensated or describe a typical fee. Financial advisors could also describe how their compensation aligns with their value propositions and what is stated in their ADVs.
Similarly, rather than detailing every aspect of their investment strategies, advisors can offer high-level insights that demonstrate their expertise without revealing proprietary information.
The Long-Term Benefits of Transparency
Transparency is not just about attracting clients; it’s also about retaining them. Clients who feel that their advisor is open and honest are more likely to stay loyal, even during market downturns or other challenging times. Moreover, transparency fosters stronger relationships, as clients feel more comfortable discussing their concerns and questions with an advisor they trust.
In the long run, advisors who embrace transparency can build a reputation for integrity and reliability—qualities that are increasingly valued in today’s increasingly complex world. This can lead to more referrals, better client retention, and ultimately, a more successful business.
The frosting on the proverbial cake can occur when financial advisor trust creates referrals to friends, family, and associates.
Embracing the Future of Marketing Financial Advice
The future of marketing financial advisory services is inextricably linked to the Internet and transparency. As investors become more informed and discerning, the advisors who succeed will be those who understand the importance of being open and honest without compromising their competitive advantages.
By embracing “strategic transparency”, financial advisors can not only build trust and credibility but also differentiate themselves in a crowded market.
The key is to be transparent in a way that aligns with client interests while protecting the financial advisor’s interests—an approach that, when executed correctly, can transform the way financial advisors market their services on the internet.
Updated 10/16/2021