While most investors trust their financial advisors, many say they’ve had an experience undermining that trust.

Trust is the axis upon which an advisor-client relationship revolves, and according to “Trust and Financial Advice,” a paper from Vanguard’s Center for Investment Research, most advisors seem to be doing a good job establishing and maintaining their clients’ trust.

In a recent survey sponsored by the Valley Forge, Pa.-based asset manager, eight-in-ten respondents gave their financial advisors a high trust rating. Yet one-fourth of the survey participants reported having had an experience that damaged their trust in a current or previous financial advisor.

Vanguard asked survey participants to rate their trust in their advisor on a scale from 0 to 10, with 10 representing the highest level of trust, and ratings from 8 to 10 representing high trust. Overall, 81 percent of the participants answered in the 8-to-10 range.

The research links a client’s trust in their advisor with their willingness to make recommendations and increase the share of assets held with an advisor. More than three-quarters of the investors who reported high levels of trust had already recommended their advisor to others, compared with fewer than half of those with lower levels of trust. Most high-trust respondents, 70 percent, said they were likely to give their advisors additional money to invest, compared with fewer than one-third of investors with more moderate levels of trust. The study also correlated trust with client retention.

Average levels of trust varied depending on investor characteristics. Trust positively correlates with investor age and tenure of financial advisors. While most investors under the age of 50, 72 percent, gave their advisors a high trust rating, 86 percent of respondents aged 65 or older said the same. While 65 percent of investors with less than a year of tenure with their advisors reported high levels of trust, 89 percent of those who had maintained an advisory relationship for 15 years or more had high levels of trust in their provider.

Wealthier investors tended to display higher levels of trust in their advisors. While 80 percent of the mass affluent, defined as those with investable assets between $100,000 and $1 million, reported high levels of trust in their advisors, 91 percent of ultra-high-net-worth investors with more than $5 million in investible assets said the same.

On average, Vanguard’s respondents had been working with advisors for 17 years, but had only been with their current advisors for around 10. Over half of the respondents had switched advisors during their investment lifetimes, with 22 percent reporting a breach of trust between them and their advisor.

Among the participants, the most common reasons for broken trust within an advisory relationship were portfolio underperformance caused by the advisor, inattentiveness towards a client or their portfolio, poor investment recommendations given the client’s goals and risk tolerance, and failing to achieve investment goals.

Respondents receiving advice through a regional broker-dealer and wirehouse channels tended to display higher levels of trust in their advisor than those working with insurance companies, independent broker-dealers, RIAs and banks.

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