The decision to trust doesn’t come easily. Or should I say that there are prerequisites to be deemed trustworthy. In his book The Trusted Advisor, David Maister defines a trust “formula” as follows:
Trust = Credibility + Reliability + Intimacy / Self-Orientation
The factors of Credibility and Self-Orientation are 10 times greater than that of Reliability and Intimacy. Credibility describes the level of knowledge, resources, and expertise in a particular field or subject. We might say “I trust what she says; she’s very credible on the subject.”
Self-Orientation refers to a person’s focus or motivation. We might say, “I can’t trust that person, I think they’re more concerned about what they’ll get out of the deal than they are about me.” The required level of trust increases with professional practices where the service we are hiring for is of a highly sensitive nature and the risk to ourselves and our livelihood can be of great significance, such as a financial advisor, a medical doctor, or an attorney.
Where “trust” is a firm reliance on the integrity, ability, or character of a person, a “fiduciary” is one in whom trust is placed. As a related example, the Department of Labor’s (DOL) definition of fiduciary demands that advisors act in the best interests of their clients, and put their clients’ interest above their own.
Credibility is a quality that we experience. Ascertaining the credibility of a professional advisor is unique to each individual. The way we process information and how we think about our relationships will influence our determination of an advisor’s credibility.
It’s too bad we don’t have a questionnaire, like a Myers-Briggs test, or Kolbe A inventory to help guide us in determining the type of advisor that will best meet our credibility needs. Is the advisor.
How do you know your advisor is making the best investment decisions for you? Does this matter? How can you be assured your advisor won’t get caught up in fraudulent activity?