When you boil out all the other variables, investors are left with just a single question: “Who can I trust?” The clamoring noises from the media, fancy TV ads, and complicated financial products all fade into the background.

The most important issue is trust.

Relationships Built on Trust

More than three decades ago, we were among the first firms in the country that focused on a new way of financial advice: a model where we sat on the same side of the table as our clients.

Our goal was- and is- to create advisory relationships built on trust.

There weren’t many like us then, but today there are thousands of fee-only advisors adhering to a fiduciary standard of client care. Even so, the financial services field is still largely comprised of people whose manner of compensation leads them towards untrustworthy advice- advice that benefits them and not their clients

Not surprisingly, there is a strong causal relationship between trust and economics, both among individuals and organizations. In business, high trust cultures have better economic outcomes than low trust environments. Individuals, companies, and even countries enjoy more prosperity in an atmosphere of trust.

The Trust Molecule

It turns out that the human emotion of trust is largely created as a result of the release of oxytocin, a neurological chemical only found in mammals. This so called “trust molecule,” has a half-life of less than three minutes. That is, it appears in the bloodstream and is used in a very brief span of time.

Neuroeconomist Dr. Paul Zak is among those who has studied exactly what stimulates oxytocin. Zak has found that included among the most replicable circumstances for oxytocin release are when you give money away and when you hug someone…anyone.

Professor Zak, whose background is in economics, not biochemistry, has found that trust and trustworthiness are closely connected to our underlying moral code. Moreover, they both are dependent on empathy, i.e. caring about others around you. Dr. Zak’s book, The Moral Molecule: How Trust Works, is an excellent read for more on his research into trust.

Place Your Trust in Those Who Are Trustworthy

People that we like tend to be people that we trust. Unfortunately, these likable folks aren’t always trustworthy. That’s the rub.

The financial product purveyors are experts at creating likable personas in order to turn on the switch that controls trust. That brief spike in the “trust molecule” can create lasting problems if those that we trust are not actually trustworthy.

Think about the classic car salesperson. They are always quick with a smile and seek to bring you closer, so that the bond of trust is developed. This does not mean that they have your best interests at heart and are trustworthy.

Your financial life should be inside an environment of mutual trust. Ready for a real conversation?

View This Blog as a Video

This blog post was popular with readers and so we made a video to illustrate the main points. Hope you enjoy- leave a comment and let us know what you think.

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