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Why Do We Call It the Age of Skepticism?

16 July 2021
3 min read
Why Do We Call It the Age of Skepticism?
| Managing Director—AB Advisor Institute

For several years, we at the AllianceBernstein Advisor Institute have described the current cultural context as the Age of Skepticism. Advisors see that clients are more skeptical and less trusting than in the past. The change is magnified for advisors who have shifted their focus from Baby Boomers to the next generation because investors in their 20s and 30s grew up in the shadow of the Great Correction. Unsurprisingly, younger people are skeptical about traditional financial-services providers and are gravitating toward discount providers and robo-advisors. This means that full-service advisors must work much harder to get noticed and be deemed trustworthy. (For more on earning trust, ask your AB wholesaler for the AB Advisor Institute’s white paper Inside the Mind of the Uniquely Successful Investor.)

What is surprising is that advisors are reporting that Baby Boomers, their traditional and loyal clientele, are also doubting the value of a financial advisor. This is expressed in widespread fee compression and a growing number of full-service clients exploring alternative providers. Even clients who have good reason to be very satisfied with their portfolio performance are raising questions.

Skepticism about financial services in general—and financial advisors specifically—seems to be everywhere. And it’s part of a growing cultural trend.

Skepticism Everywhere

The Gallup polling organization surveyed Americans across five decades about their confidence levels in traditional institutions such as organized religion, government and industries. The scale went from a “great deal” down to “none.” In every category, the survey revealed a steady drop in confidence since the 1970s. 1It’s remarkable how widespread and extreme this loss of confidence is across such a diverse list.

Confidence in Institutions

 
 Great Deal/Quite a Lot Great Deal/Quite a Lot
 
1975 or 1979
 
2020
 
Organized Religion 68% 42%
Congress 40% 13%
Presidency 52% 39%
Big Business 34% 19%
Banks 60% 38%
Medical System 80% 51%
Newspapers 51% 24%

Americans have always been skeptical about politicians, but now people lack confidence in their bankers, ministers and doctors.

Why Is There So Much Skepticism?

These trends are significant, in terms of both depth and breadth. Importantly, this trend isn’t new. Since the National Guard shooting at Kent State University and the Watergate scandal, our culture has been hotly pursuing transparency and accountability. Consumer activism continues to increase across our economy, and most organizations have raised the bar on which behaviors are tolerated and which are not.

What fascinates me is that our institutions are improving across many criteria, yet this is driving skepticism higher. We’re seeing greater transparency and accountability, which means we’re hearing things that used to be secret. The long-term benefits are clear, but the short-term implications are painful: we have learned that trust is fragile; it’s easily broken and very hard to repair.

Plus, in our highly connected world, we’re at risk from unscrupulous people who want to harm our equipment or steal our money! The Internet and social media started as idealistic instruments of connectivity, but they’re now also tools for criminals. We must be vigilant or we can be manipulated or harmed via email or social media. We must maintain a healthy skepticism about who is connecting with us and for what purpose.

The result is that our ability to trust has seriously been eroded. We live in a time when skepticism is warranted as an important act of self-protection. This affects every relationship, even an advisor-client relationship.

What Can an Advisor Do?

The first things you can do are accept that you live in the Age of Skepticism and understand how fragile the experience of trust is for people today. Clients need more than decent performance and check-in calls twice a year; they need regular substantive conversations that reinforce the experiences of trust.

These conversations should be about the portfolio and the capital markets but must go deeper than before. Your clients need reassurance that you’re paying attention to what’s happening, especially if it’s something big and disruptive. And clients need to know that you’re aware of the details of their lives, especially when something is changing. Paying attention to life transitions and unexpected disruptions lets the client know: “You matter to me.”

The next thing you can do is see building trust as a proactive exercise in every relationship. All clients deserve an in-depth onboarding process and a financial plan that accurately expresses their values, concerns and deepest hopes. Your job is to become a character of significance in the lives of your clients: someone who demonstrates repeatedly that you are trustworthy.

In the Age of Skepticism, nothing will differentiate you more!

For more resources from the AllianceBernstein Advisor Institute visit http://alliancebernstein.com/go/abai.

1 Gallup, “Confidence in Institutions,” https://news.gallup.com/poll/1597/confidence-institutions.aspx

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

About the Author

Kenneth Haman is the Managing Director of the AB Advisor Institute (AB AI). AB AI provides insights from the behavioral sciences, including behavioral finance, to client-facing financial advisors to improve their marketing outreach and relationship-building efforts with investors. Haman began his current role at AB in 2005. Prior to this, he managed a psychotherapy practice in the Washington, DC market for 20 years. Haman holds a BA in business administration from Lebanon Valley College; an MDiv from Princeton Theological Seminary; an MAPC from Moravian College; and certifications in clinical hypnosis and neuro-linguistic programing from the American Hypnosis Training Academy. Location: Nashville