Selling Trust into the Sales Process (Episode 40) Trust Matters,The Podcast

Welcome to the newest episode of Trust Matters, The Podcast. Listeners submit their personal questions about professional relationships, trust, and business situations to our in-house expert Charles H. Green, CEO, Trusted Advisor Associates, and co-author of The Trusted Advisor.

Jennifer from a Telecommunications company writes in and asks, “I know you’ve written about Trust-based Selling. My question is not to ask you to explain Trust-based Selling, but instead how to SELL the Trust-based Selling approach into my sales training team?  What’s the hook? The business case? How can I get them to consider it seriously?”

Do you want to send your questions to Charlie & Trust Matters, The Podcast?

We’ll answer almost ANY question about confusing, complicated or awkward business situations with clients, management, and colleagues. Email us: [email protected]

Trust Matters, The Podcast: Can I Trust Digital Marketing for Lead Generation? (Episode 26)

A Co-Founder of a small Management Consulting Firm asks, “We need to grow our sales funnel. Can we trust Digital Marketing and SEO for lead generation?”

For more on this subject read our blog post:

Do you want to send your questions to Charlie & Trust Matters, The Podcast?

We’ll answer almost ANY question about confusing, complicated or awkward business situations with clients, management, and colleagues.

Email: [email protected]

We’ll be posting new episodes every other Tuesday.
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Trust Matters, The Podcast: How to Reengage Unresponsive Sales Leads(Episode 25)

A manager at a communications firm writes in and asks “How to you manage qualified sales leads that seem very interested but then go silent? Do you keep reaching out?  Do you try another approach?”

Do you want to send your questions to Charlie & Trust Matters, The Podcast?

We’ll answer almost ANY question about confusing, complicated or awkward business situations with clients, management, and colleagues.

Email: [email protected]

We’ll be posting new episodes every other Tuesday.
Subscribe to get the latest 

What’s the Link Between Trust, High IQ and Investors?

A recent Journal of Finance article suggests there’s a high correlation between IQ and participation in the stock market. Now, what does that mean?

Yale Economics Professor Robert Shiller explores the theme in a NYTimes column. He posits an interesting link between intelligence and trust.

The Smarts To Do What?

IQ tests are notorious for being good at measuring what IQ tests measure. What that is, is another question. But let’s stipulate that mathematical intelligence is somewhat correlated with IQ tests, and that intelligent investing requires more math than buying milk at the supermarket. That might explain why only half of American adults have money in the stock market.

But does it explain why higher-IQ people also seem to construct better-performing portfolios than do lower-IQ people? As Shiller points out, it’s not that high-IQ people are better stock-pickers – they just do a better job of following the basic rules of investing, namely diversify your risk.

But why should ‘rule-following’ correlate with IQ, anyway?

The Smarts to Trust

Shiller cites another study, this one from the Netherlands, that finds “those who indicated a high level of trust were 50 percent more likely to invest in the stock market.”

Further studies indicate low stock market participation may be the result of fear and suspicion – low trust prevents people who don’t understand the stock market from approaching those who do.  Namely investment advisors, brokers and the like.

Now the link gets clearer. It may not take a high IQ to understand diversification, but if you don’t trust the people who talk about diversification, you’re not going to learn about it.

Shiller makes another leap here that I’m not so sure about: as he puts it, “Knowing whom to trust, and relying on those who are trustworthy, is itself an aspect of intelligence.”

Intelligence, Education and Trust

I’m not going to get involved in defining intelligence, but I do know this. The tendency to trust others has been shown by trust researcher Eric Uslaner to be positively correlated with optimism, and with a sense of control.

People who feel the world is basically going downhill – and that others are controlling their lives – are untrusting people. By contrast, those who feel that the world is generally moving in a positive direction, and who feel some degree of control over their own lives, are more likely to trust other people.

And what drives those distinctions? Uslaner points out the biggest drivers are income inequality and education. In other words: uneducated people in a society of high inequality are at the greatest disadvantage.

The Vicious Circle of Trust, Education and Investment

The less that uneducated people in an unequal society are willing to trust those who understand financial planning, the more likely they are to stay doomed to low income, thus driving perceptions and reality ever downward toward greater inequality. So what’s to be done?

Of course, it would help if the financial industry got more trustworthy. Josh Brown, in Backstage Wall Street, notes that “93% of all investors didn’t understand that their broker didn’t have a fiduciary responsibilty to them.” Yet the industry continues to advertise an image of trustworthiness, while opposing legislation to make them subject to fiduciary standards.

Such behavior definitely drives mistrust, and it’s the industry’s own fault.

But other policies are society’s fault. In the rush to cut our deficits, I heard a few weeks ago that the School District of Los Angeles no longer employs any music teachers. Certainly education has become a far lower priority these days in our rush to what we think is fiscal rectitude. A casualty is trust.

And finally, inequality itself breeds distrust. That simple fact is very uncomfortable for a great many of haves, and a lot of political ideologies. But the fact is, economically egalitarian societies have higher trust levels. Inegalitarian societies have lower trust levels. The trends are self-reinforcing.

Do we want a vicious circle? Or a virtuous circle? If we’d like people to participate in the stock markets, we’re not going to get there by advertising or by cutting school budgets.

We’ll get there through trust. And it shouldn’t take a high IQ to figure that out.

Books We Trust: True North Groups, By Bill George

This is the seventh in a series called Books We Trust.

Bill George is author (with Peter Sims) of True North: Discover Your Authentic Leadership. Part of the J-B Warren Bennis series, it has been widely read and praised. In his new book, True North Groups, he (with co-author Doug Baker) focuses on how True North precepts can get established for people and organizations.

Bill George is another small-town Midwesterner who made it (very) big. After punching his ticket in the McNamara Defense Department days, he eventually spent a decade each with Litton Industries, Honeywell, and Medtronic (where he was CEO).

These days he teaches leadership at Harvard Business School and serves on the Board of several Very Big companies. Click to his bio; you’ll be impressed.

Bill does not waste time; we got right into it.

Capitalism: Back to the Future

Trusted Advisor Associates: Bill, after your MBA, you spent decades in big-business companies that worked closely with government. How did you feel watching the progression of Milton Friedman, Michael Jensen, Ayn Rand, Alan Greenspan, and the doctrine of shareholder value—an ideology that pitted business against government?

Bill George: Michael Jensen has recanted; he’s writing about ontological leadership with Werner Erhard. Greenspan admitted the flaw in that ideology.

There’s been a total transformation. We have collectively realized the flaws in those old simplistic economic theories; this notion that people are motivated only by self-interest, this is simply not true. Mike Porter is another one, a brilliant guy who is now writing about shared value, not shareholder value.

There is a transformation in business right now of major companies moving away from that old paradigm.

Take Alan Mullally at Ford; he’s changing things there right down to the individual employee level. He is focusing on the long term, on sustainability.

Corporate CEOs today are the best I’ve seen, the best in my lifetime. Besides Mullally at Ford, there’s Palmisano at IBM. Steve Jobs rightly got a lot of credit. All the CEOs I know are moving away from shareholder value to values and vision. Paul Polman at Unilever says, ‟My job is not to serve the shareholder, but to serve the customer.”

TAA: That’s pretty optimistic. What do you think happened?

Bill: It’s just what’s happening, that’s all. These things only happen when you come to realize we were going the wrong way. Think Enron; that was a hugely emblematic event…there were 100 large companies with very large “accounting” problems.

You get a raft of major companies like BMS with a $1.5B accounting adjustment, and that’s not an accounting problem—that’s a failure of leadership. This went way beyond a few crooks; this was a business disaster.

But we’ve seen that. Outside Wall Street, there are a lot of really big companies that are just done thinking that way. Not going back.

Wall Street and Washington

TAA: What about Wall Street?

Bill: Wall Street never ceased. The problem is maximizing short term shareholder value―that’s the best way to go out of business. So it’s really not surprising Wall Street melted down.

Regarding Wall Street, I’m a wait and see guy. There are all new CEOs on Wall Street now―Jamie Dimon and Lloyd Blankfein are the old guys. The new folks are the ones who’ll have to make the call. A guy like Paulson can make $4B selling things short; that’s legal, he does it fair and square, but let’s not kid ourselves that’s value creation—it’s not.

TAA: What about Washington?

Bill: I’d like to see them lead, but we’ve got to take it out of the political arena: we’re just not going to get there via the politicians. They’re more interested in the parochial, ideological interests.

And that’s the greatest sin. We in business lost sight of why we were in business, lost track of the role of leadership in the first place.

Toyota and J&J took their eyes off the ball. Ford’s now beating Toyota, because Toyota took its eye off the long-term, culture/quality ball. And Ford rediscovered it.

I was on the board of Novartis. They always focused on a breakthrough drug to solve unmet patient needs―a drug that is going to advance medicine. Look at Ken Frazier at Merck, Pfizer vs. Merck, he’s pushed to keep up the level of R&D spending. Pfizer’s done the exact opposite. The short-termers keep citing Net Present Value as the driver of short-term focus, but the truth is they don’t know how to do the math right.

[CHG: An aside—read this WSJ article from February 4 of this year detailing Bill’s point: when the two companies announced their opposite strategies, the market drove Merck stock down 2.7%, while Pfizer saw its stock rise by 5.2%. That’s an 8% spread because of announced strategies.

Today, 8 months later, try comparing the two companies’ stock prices; they are back to dead even; the gap is gone. But Merck has the advantage of a tailwind in its R&D momentum; Pfizer gave it up.]

Leadership and True North

TAA: Let’s talk about leadership and bring it back to True North Groups. What should leadership be about?

Bill: Back in the day, HP was just a great company. Dave Packard totally practiced MBWA, management by walking around, a truly humble guy. Four successive CEOs now have gone the wrong way. Leadership matters greatly.

The key issue now is that the leaders’ job is not to exert power, but to empower people, including those who have no direct reports. You have to have an empowered group of employees that are excited about mission and values. If you only bring your head to work, you cut yourself off at the neck; if that’s all you can bring to the game, I’d love to compete with you.

The key issue in leadership is not to develop the next CEO, it’s to develop leaders all over the place. It’s not about developing a few good people at the top, but working on 10,000 or more.

The question is how to develop those leaders: you can’t do it through the old Darwinian GE model. Not everyone should be focused on getting Jeff Immelt’s job. That is just not where the traction is.

That’s where True North groups come in. Turns out that the best way to truly develop individual leadership capabilities is in small groups, made up of peers, of people who tell life stories, where people can find out who they really are. Because if they lead life as a fraud, thinking they’re impressing the world, it won’t work.

Steve Jobs’ most powerful message was to be who you are. Don’t let others’ opinions—Wall Street, recruiters—rob you of the courage to follow your heart. They used to snicker at me at Harvard Business School when I talked like that, but they don’t today.

TAA: How do you find a True North Group, and how do they get it right?

Bill: We found it happens in small groups. You see the success of this small-group phenomenon in affinity groups—AA, the YPO, breast cancer survivor groups, Rick Warren’s Saddleback Church—read Malcolm Gladwell’s explanation of it.

We tried to take this to people who don’t have an affinity group like that; people in business—what are they supposed to do? A great way to define a True North group is to ask yourself, “If I found out I was going to die, who would I talk to?” That’s your group.

TAA: What is it that True North Groups do?

Bill: If you buy the premise that we have to help develop people, this is the way to do it. You don’t go to Wimbledon to play tennis—you start years before. You don’t learn leadership by reading, you learn it by doing it—by living it, and talking about it. And then you need a way to process that.

There are several things we write about in the book that are critical to True North Groups’ success; I’ll highlight a few. One is non-judgmental feedback.The courage to tell it like it is—not ‘brutally,’ because that would come with judgment. Just speaking the truth, straight-up.

TAA: This is not leadership development ala Jack Welch’s GE.

Bill: A lot of people still want to use leadership development as a selection process; the big boss comes in and watches a while and says this guy’s good, that guy’s not.

Instead, you’ve got to have confidentiality and peers. This is a little hard for the leadership development people; a lot of them still like bringing people to Crotonville, but that’s too expensive.

You know the one thing we heard from leaders we interviewed? Loneliness. They’re alone. That’s true for middle managers too—the sandwich phenomenon, pushed from both ends. What’s the treatment for loneliness? A group.

People want to know, can I be real in the workplace? Is it OK? A group deals with that.

Making It Happen

TAA: You’ve actually influenced the Harvard Business School to do this, right?

Bill: My course on leadership uses small groups of 6 people. Half your time in this course is spent in authentic leadership development this way. 1,500 HBS students have gone through it—1,100 or so MBAs, and another several hundred from exec ed programs. About half your credit is for hanging out in that small group.

TAA: How well does it go over?

Bill: Neo-classical economists don’t get it, and neither do Wall Streeters—for the most part. Yet. But the rest do. It is quite significant that the Harvard Business School appointed Nitin Nohria as Dean. [Readers might also enjoy an early TrustMatters blogpost on the MBA Oath].

TAA: How does this play out for you?

Bill: Here’s the irony: all my life I’ve seen myself as a leader—because people followed me. Now I realize, that’s not what it’s about at all. It’s about empowering others.

I get to talk to all these great leaders—Mullally, and so on. I tell them all, ‘Just call me, let’s talk.’ Because we all need that. No charge, of course; we just talk.

TAA: This has been great. I will try and organize these notes into a coherent whole, and run them by you so you get the final word.

Bill: Nah, don’t worry about that. Just print it up.

 [CHG: And so that’s what I did.  If there were any mistakes made in summarizing our talk, I guarantee you they’re mine].

Impressions: An American in Denmark

It’s good for us Americans to travel—our views of foreigners come from our own little echo chambers filled with little real data. I’ve traveled to Denmark several times, though I wouldn’t say I know the country well.  Still, I’d like to share a few of my impressions from this past week’s trip.

The American geography sobriety test.

Socialist Economy.

Creativity—The cloth/paper carryall-bag.

Innovation–Cell phone Parking Meters.

Street-ready wheelchairs.

The Resistance Museum.

The American geography sobriety test. My U.S. brethren (and I) are often a little vague about points on the world map, much less their relative distances from each other. Try this test:  answers at the end.

  • Distance from Copenhagen to Rome
  • Distance from Copenhagen to Hammerfest, Norway
  • Distance from Copenhagen to Moscow
  • Distance from Copenhagen to Madrid
  • And, just for kicks, the population of Denmark

Socialist Economy.  My guess is that the average American thinks of Denmark as a “socialist” country.  Yet one Dane tells me, “I find that amusing; Danes would not consider our government or our economy socialist as such—we just (mostly happily) pay high taxes.”

According to the OECD:

US                        Denmark

GDP per capita                         $46,860               $55,986

Taxes as % GDP                        24.0%                     48.2%

Obesity rate                                30.6%                       9.5%

Divorce rate/ 1000 ppl            4.95                           2.81

Crimes/person                           80.1                         92.8

Murder w. guns/million ppl       30                           3

Life expectancy                           78.3                        78.3

CreativityThe cloth/paper carryall-bag. Your average American may believe that “socialist” economies sap the creative energy out of people. A moment’s reflection about Danish furniture (Americans well know the name Dansk) should give pause to that idea, but if not, here’s another.

I snapped this picture of a little bag they gave you at a coffee shop.  It feels half-paper, half-cloth.  It comes in packages of maybe 50, like paper napkins. Like a napkin, it lies flat on the counter.

But unlike a napkin, it’s cleverly slit—like a shark’s gills—so that when you pull up the edges, it becomes a 3-D bag, amazingly strong enough to carry several cups of coffee and various pastries.

Cell phone parking meters. Too artsy for you?  How about this…an entrepreneur struck a deal with the national government to combine GPS devices and a national database to bypass parking meters.

You find a parking place, text the service (which then determines the parking zone in which you’ve parked), enter the time you’ll be parking—and go on about your business. If you decide to stay an hour longer, no need to run down and get coins to feed the meter—just dial up and add an hour. The parking cops know you’ve paid—because they’ve got online access too.

No broken meters. No scrounging up coins or a credit card to buy a piece of paper, no going back to your car to put it in the windshield. Try picturing that in the U.S. Or in Manhattan. Heck, even just Syracuse. I don’t think so.

Street-ready Wheelchairs. Along with the Saabs and Audis and Citroens, you can see some fairly hefty wheelchairs moving along in the street in the right-turn lane. Not in the sidewalk, but out in the lane, not unlike bicycles (of which there are tons, of course).

I’m not sure what to make of it, just interesting.  Along with no obese people; I’m talking, none. Zero. Whatever they’re eating, we should too. (Me, I love herring!).

Or maybe we should exercise like the Danes. They walk like crazy, everywhere, have great posture, are slender, and very athletic.  Many smoke too, but only in moderation; the smokers also walk like crazy. They treat cigarettes like we treat espresso—a few a day.

The Resistance Museum. Maybe it’s my age, but I find history to be very helpful in understanding a country’s psyche. (If you get to Singapore, check out the National Museum of Singapore, you’ll understand Prime Minister Lee Kuan Yew and Singapore much better. And if you really want to get into it – Singapore is one of the most fascinating nations in the world – check out the aptly named 100 Best Things to Do in Singapore, from Jen Reviews).

In Copenhagen, I stumbled across the Resistance Museum. During World War II, Nazi Germany basically held a gun to the leaders Denmark in order to gain access to Norway.  With a population one-tenth the size of Germany and essentially no military, the Danes had little choice.  Their government agreed to be occupied by the Nazis, and yet be officially neutral. There are those who considered it collaboration; after August 1943, all cooperation officially came to an end.

The museum explains well this neutrality, as well as a real and significant Resistance. See for example the stories of The Torch and the Lemon, two courageous Resistance leaders.

When the Nazis threatened to round the Jews up, a great many Danes took serious risks to ferry the entire Jewish population across the sound to Sweden in just 10 days. The support was grassroots—as the word spread, people called up strangers with Jewish-sounding names in the phonebook to warn them.

When you occupy a border with the nation who invaded you and killed some of your citizens, you have some baggage to deal with. Younger Danes are quite forgiving and feel the Germans have punished themselves enough.  Older Danes make a distinction between the Nazis and the Germans, and seem to have come to terms with it in their daily lives.  But one senses they also have not forgotten.

Spending time in cultures other than our own is always enriching.  I find it also makes it easier to trust people.

One of the better things we Americans could do for ourselves and for the world is to loosen up on our restrictions toward tourism and immigration into the US; and also to invest in sending 100,000 high school students per year to a foreign country. That would go a long way in getting us outside our little echo chambers.
Answers to the American geography sobriety test:

  • Copenhagen to Rome: 952 miles
  • Copenhagen to Hammerfest, Norway: 1089 miles
  • Copenhagen to Moscow: 968 miles
  • Copenhagen to Madrid: 1289 miles
  • Population of Denmark: 5,529,270

Real People, Real Trust: What Trust-based Strategy Consulting Looks, Feels, and Sounds Like

Janet Andrews is a senior-level consultant at SRA’s Touchstone Consulting Group, a strategy and management-consulting firm. Janet spends her days running from one U.S. federal government building to the next, working with executives on issues of national interest. Discover Janet’s six tips for building trust-based relationships while getting the job done.

A Matter of Focus

“Janet’s reputation can be described as polished, thoughtful, and methodical,” says Jen Vanmeter, a colleague of Janet’s who teaches Trusted Advisor programs in-house and who co-wrote this blog. “She’s known for her smarts, her work ethic, and her integrity—she does exactly what she says she’ll do, when she says she’ll do it.” Jen continues, “She’s incredibly busy, and yet she takes time to pay attention. Even in a quick hallway chat, she’s focused on you, not the meeting she’s dashing off to.”

Jen and Janet spoke at length about how to build trust-based relationships in the midst of demanding and high-stakes projects. Here are Janet’s six maxims for client relationships that really work.

1.     Know Yourself; Know Others Even Better

When Janet thinks about building trust in business relationships, she makes it a point to step back and think what is most important for the person she’s talking to.

“If you have a client who leads with social connection, then that’s where you need to put your foot out first. If someone is results-oriented, they might not want to chat—they want to know what we did for them today. This colors how I position things; it helps me think, ‘How do I start off that conversation?’ That awareness of my own style and preferences helps me see that what I want to lead with maybe isn’t what will work best for them.”

2.     Remember It’s Their Truth, Not Yours

“Sometimes your version of what is right isn’t right for your client,” Janet says. “When I want my clients to do the right thing according to me, rather than the right thing according to their reality, I can easily become frustrated and therefore less effective.

“When I view their world with a lens of objectivity and put aside judgment of ‘that choice is good or bad,’ then I can walk into conversations with a more open mind. And I’ve noticed that clients respond in kind. When I remember they’re the ones that are living it, not me, then I focus on doing my best to advise them. Yes, I’m trying to sway them, but I keep in mind the decisions and choices that come out of it are theirs to own.

“Am I disappointed sometimes? Of course. But I keep reminding myself that whatever conclusion they come to, it is their truth. It’s my job to give them my best thinking. Pushing them on something they don’t want—or don’t want yet—is going to break trust, not build it, no matter how ‘right’ I think I am.”

3.     Focus on the Dialogue, not the Difficult

While Janet acknowledges that there are always difficult conversations to be had in any business relationship, she says they don’t have to be personally difficult.

“Earlier in my career, I might have taken more of a defensive posture with clients whose style can be aggressive or combative. Now, I see a tense conversation as less of a conflict, and more of a dialogue. And when I feel less tense, my clients seem to also.”

4.     Bravely Go First

“If there’s an elephant in the room that no one wants to bring up, I take a deep breath and bravely go first—once I’ve put aside my own judgments. If you can somehow frame the elephant by thinking about the other person’s motives, viewpoint, and how they like to lead, it can bring down their barriers to listening, so a dialogue—not a stand-off—can ensue.”

5.     Slow Down and Listen

Janet emphasizes the importance of listening, which can be challenging in the fast-paced world of strategy consulting. “Learning to be less focused on dictating how the play is going to end, and more focused on listening along the way, has been a real shift for me in my career.

“I remember once we were working on a key deliverable for a client. We’d been back and forth a couple of times on drafts. The client was mad at our team for not taking her comments seriously enough, and the team was frustrated because they thought she was being difficult. All it took was a real conversation and some patience to break the logjam.  Slowing down to really listen made me realize that we were all arguing the same point. When I acknowledged that, she agreed and we were able to move on.”

6.     Don’t Sweat It When You Don’t Click

 “Not all my clients consider me their trusted advisor. That used to worry me—of course I want everyone to like me. Now I recognize that sometimes it’s not going to click. So part of being a trusted advisor is being self-aware enough to recognize when it’s time to pass that relationship off to someone else who might be better suited for the relationship.”

Janet’s self-knowledge, her commitment to continuous improvement, and her willingness to focus on relationships as well as results clearly make a difference—for her colleagues as well as her clients.

Connect with Janet on LinkedIn.


The Real People, Real Trust series offers an insider view into the challenges, successes, and make-it-or-break-it moments of people from all corners of the world who are leading with trust. Check out our prior posts: read about Chip Grizzard, a CEO You Should Know; Ralph Catillo: How One Account Executive Stands Apart;  Anna Dutton: A Fresh Perspective on Sales Operations; and Heber Sambucetti: A Learning Consultant’s Approach to Leadership.

Straight from the Headlines: Trust in People, Companies, Nations

Three trust-related headlines last week:
  1. An insider trading conviction for hedge-fund billionaire Raj Rajaratnam,
  2. free-fall in Morgan Stanley’s stock price, and
  3. drop in the Chinese government’s credibility.

A Person

Mr. Raj Rajaratnam, former head of the Galleon Group hedge fund, and once worth a billion and a half dollars, was sentenced to 11 years in prison.  His crimes were the stuff of movies—secret deals and secret messages—insider trading.

Some finance theorists think “insider trading” should be legalized, though most people would sooner see heroin legalized if they had to choose.  Rajaratnam’s white-collar hand-in-the-cookie-jar crimes are, it is generally agreed, egregious and immoral. He’s going where he belongs.

Raj is a poster child for low trust. Lying, cheating, conniving, sneaking—he was everything you wouldn’t want in a trusted partner.

But he is a sideshow. Rajaratnam, Bernie Madoff, Ivan Boesky—these are the movie versions of white-collar crime. Raj and Bernie no more caused our current financial malaise than Bonnie and Clyde caused the Great Depression. And we cannot solve our global trust problems by simply picking off colorful foot soldiers from the Dark Side, no matter how untrustworthy they are.

A Company

Jesse Eisinger in the NYTimes notes that by nearly every financial measure of strength and trustworthiness—more capital, longer-term financing, lower leverage—Morgan Stanley is a stronger bank than it was in September 2008, at the height of the crisis. So, why has their stock price dropped 42% this year?

Trust, that’s why.

Morgan Stanley, and other banks, still holds massive amounts (defined as over $50 trillion) in unregulated derivatives. And of course they don’t want regulation. But they are not stupid—the banks themselves are not about to trust each other when they know the other guy is holding part of that unregulated $50 trillion. As Eisinger puts it:

“Surely no bank would be so reckless as to accept dodgy collateral these days. It would hold out for something unassailable, like, say, Triple A mortgages on American homes. Wait, scratch that. It would accept sovereign debt, perhaps from some European realm that has been around for centuries. Whoops, no, no. Well, O.K., maybe United States Treasuries—and we’ll agree to ignore that one of the country’s two major political parties was willing to plunge the United States into default to achieve its aims.”

The banks don’t trust each other. They do agree that they don’t want governments checking their numbers; they also agree that letting Lehman go was a big mistake—that governments should be willing to bail them out.

But the people are not too happy about their governments bailing out the rich guys, whether they’re at OWS, in Greece, or even in Germany.  The governments are looking like neither paragons of virtue nor representatives of their citizenry.

A Country

Never mind the GOP playing chicken with the US’s credit ratings; never mind Germans and Greeks playing chicken with Europe. As Reuters notes:

Equities jumped 10 percent on the day three years ago when China said it would buy up bank shares in the market. They barely budged after a similar announcement on Monday. The difference is credibility. A sustained financial crisis has shown that governments around the world have a limited ability to make things better.

Nations around the world have kicked the can down the road regarding public expenditures. They’ve done the same thing regarding energy and the environment.

The human race has been conspicuously failing recently at two key trust skills—collaboration and constructive confrontation.

Trust Recovery: Where Do We Start?

Yes, it’s complicated. There are feedback loops everywhere. Beware of simple answers. 9-9-9 may work in a computer simulation game, but does not a tax plan make.  8-8-8 is not the answer to health care, and 7-7-7 is a better lotto number than a plan for campaign finance.

But complexity works both ways. It means the whole system is loaded with causality.  No single change at the person, policy or institution level may be necessary, or sufficient. But actions at every level do have impacts. We can push back at the personal level, at the company level, and at the national level.

It is a good thing that Raj Rajaratnam got the longest-ever prison sentence for insider trading; it sets a moral tone that is in stark contrast to an amoral ideology that we have allowed to infect our entire commercial sector.

It is a good thing that people are protesting the serious transfer of wealth and power that has taken place in recent years, because increasing inequality ruins social trust.

Yes, it’s complex to recover trust, but it can start simply. Here are three steps.

1.    Promote personal character. Don’t fudge your taxes. Don’t lie, don’t ask others to do so, and just say no to those who ask you to do so. Teach your children. Thank people who do good and shame those who don’t. Stick your neck out a little. On alternate Thursdays, pay the toll for the car behind you.  Pick out a small sum of money and give it to a charity that needs it more than you do.

2.    Promote better thinking. We have seen the result of four decades of economists who think that markets are self-clearing and that financial institutions will self-regulate out of concern for their reputation; business theorists who preach competition instead of collaboration; CEOs who think the purpose of a company is to raise shareholder wealth; and politicians who think either that government is a feeding trough or that interstate highways are communist plots.

The result is not good, and much of the trouble arises from bad beliefs. We will not solve our problems through belief in econometrics, patent litigation, or demonization of foreigners. Tell the b-school professors, the law schools, the think tanks and the industry associations to apply their talents to understanding and building systems around collaboration instead.

We are, in fact, all in this together. We need to start believing it so we can act on this belief.

3.    Promote better politicians. Don’t support simplistic ideologies.  Stop contributing to single-issue pressure groups. Scream for campaign finance reform; on everything else, stop screaming.

Read up. On alternate Tuesdays, watch Fox or CNBC, whichever one you makes you uncomfortable. On alternate Fridays, read a foreign newspaper online. Don’t give money to, talk about, or vote for candidates who out-negative their opponents.  Support those with a message and a plan of their own.

Tell the media, the politicians and anyone who wants your support that you’re done with vague platitudes and simple slogans. Tell them you want the truth.

Ask them, “Why should I trust you?” And don’t settle for an answer you can’t believe in.

Books We Trust: The Seven Stages of Money Maturity

George Kinder, father of the Life Planning movement and founder of the Kinder Institute of Life Planning, talks to us about the first of his books on the integration of financial planning and the human condition, The Seven Stages of Money Maturity, in the latest installment of the Books We Trust author interview series.

Life Planning

Trusted Advisor Associates: George, I don’t know of any other book that reaches so far across the right brain / left brain divide.  Or is it the money / spirituality divide?  In any case, you manage to integrate asset category management with the Buddhist Bodhicaryavatara.

What is it that you’ve done here? What is this thing called Life Planning?

George Kinder:  We have gotten stuck thinking of money as about counting, about numbers, something abstract done by banks and accountants.  The truth is, money is a much larger topic—it involves our whole human nature. I talk about the conversation that needs to take place before a financial plan can be done.  That conversation is all about the human being, so we can go into emotional and creative territories.  It requires a different way of listening.

Most financial planners don’t think this way.  They were brought up on old sales approaches.  Life insurance was the first product; it got encrusted with sales techniques.  Then we got to stocks, which have always represented a commodity to people. So we’ve never had a consciousness that money has a purpose connecting it to our passions and our deeper levels of meaning.

A group of us around the globe said, this is not the way it should be, and we set about to change it. Is there a client relationship dividend to re-thinking this approach?  There sure is, and it’s huge.

TAA: Lest I give readers the wrong idea, this book and your work are part of mainstream, hardcore capitalism.  You are highly regarded among financial planners and wealth managers, people to whom other people entrust the management of their money.  This is not fluff stuff, and your clients are as sober and conservative as any.

George: Let’s touch on your “mainstream hardcore capitalism” language.  That’s an important message for my and your audiences alike. We have a secular financial system that has basically failed.  It’s in collapse. The trust level for financial advice is so low these days partly because you have to question the sustainability of our very system.

A Dow Jones survey from a few years ago (Dow Jones Wealth Management, After the Crunch) said 75% of consumers who have a financial advisor would never recommend that advisor to a colleague or friend. How horrible is that!

The trust issue is threatening what we think of as hardcore capitalism.  We believe in supply/demand and efficient markets, but the proper reverence for a vital system isn’t there, and without that quality of reverence the whole system is threatened. You can’t have a trust relationship built around nothing but avarice and sales.

TAA: Who are your clients? Who needs and hears your message?

George: We at the Kinder Institute work with three different markets.  The Seven Stages book was written for the consumer.  That’s one market, which I’ll expand on in my new book called Life Planning, co-authored with Mary Rowland.

The second client group is independent financial advisors, usually CFPs or the various global equivalents.  We work with advisors in 23 different countries.

The third group is corporate clients; we’re moving into markets in North America and Europe, mainly the UK.

Companies are in danger because their products are commoditized and sales-driven, and consumers have had it with the old approaches.  Consumers need this more human approach because they’re dysfunctional when it comes to money, and because they have no one to talk to about it.  And advisors need it because their model also is being challenged; they’re all scrambling to figure out what a client-service model looks like.

There are enormous opportunities for all concerned.

Integrating Art and Finance

TAA:  How is it you came to write such a book?  You were an artist who became an accountant—but you kept both sides of your personality. That’s unusual.

George: I was an accountant because I had to be, I had to make a living.  Following your bliss didn’t work for me—I tried it, but I couldn’t make money from my paintings or my poetry.  But I developed a strong business sense from the accounting, and that became the basis for my business now.

I was an over-achiever: despite the artist in me, I had 800s on my math boards, but lousy verbal skills.  I was competitive and cocky so I majored in English–I figured I already knew how to do Math.

TAA. You talk about people’s profound relationship to money.  People would sooner talk about their sex lives than their money lives, and money is the source of profound psychological meaning, or dissatisfaction.

Your narrative of progression to Money Maturity parallels that described in Buddhism for personal growth. What’s the connection with money?

George:  Human growth has to mirror the growth of our relationship with money, because money enables so much of our lives.  I like to say there are far more money apps for human beings than there are computer apps in the app store, because money facilitates everything in life.  People have dysfunctional relationships with money and they have trouble getting advice about it.

Buddhism? I taught meditation for 25 years, and led week-long silent meditation retreats in each of those years; I just came out with a book on meditation—a secular book, not a religious one.  When we train financial advisors to listen really well to their clients, we start those practices with “inner listening,” which is basically a meditative practice.

If you’re not aware of what’s going on inside you, you can’t separate your own thoughts and feelings from those in your clients.  We’re highly cerebral in our normal lives, and when talking with clients, we need to be much more connected with our emotions, and with theirs.

Financial Planning Today

TAA. Your earliest version of your seminar was called “12% in 12 Years,” and it was about how you could achieve financial independence.  That was then. Now, the Dow sits where it was a decade ago, and bonds are yielding low single-digit returns. Very low.

It’s got to be harder to achieve financial nirvana these days; how do you advise people now?

George: When I was giving the 12-and-12 it was an exhortation to consumers to save 12%, not to earn 12%.  So you compound as best you can, and you simplify—both while you’re earning, and when you retire.  You ought to be able to have modest financial independence.  That’s still true, but obviously when you look at the yields of the last decade, it’s a much harder task to accomplish.

One of the values of life planning is it gets away from the numbers and gets down to what’s really important.  What’s most important is actually much easier to achieve than when it’s all about money.

TAA: Most financial advisors just jump into discussions of required spend levels, rates of return, financial risk profiles, and so forth.  They forget the entire front end—why is it that we’re doing this stuff in the first place?

I sometimes think that the financial planning industry is the most product-driven business I know: they can’t even graduate from features to benefits, much less to goals.

George: In Life Planning we look at goals deeply and seriously. What people care about most is their family. Four other things come close to it, but they’re mainly concerned with family, spouse, and relationships.

The next most common response has to do with values: not living their values the way they’d like.  Maybe their job threatens their integrity; (sometimes it’s explicitly religious or spiritual, though that’s true more in the US than in Europe).

The third most common goal is a wild creativity; the fourth is community and the fifth the environment or sense of place–typically people talk about a move to the city or the country.

And all these things are doable!   This puts the advisor in a much stronger role, focusing on what the persons really care about, rather than trying to force money itself to do all the heavy lifting. We help them live with passionate purpose.

TAA. Financial planners and wealth managers come in many forms these days.  What roles do you see being played by the Financial Planning Association, by the National Association of Personal Financial Advisors (NAPFA),  by your own Kinder Institute, and by similar associations outside the US? What’s been the evolution of brokers and independents?  Does the fiduciary movement have legs?

George: The fiduciary movement definitely does have legs.  For the first time in a long time, this movement toward client centricity is happening more outside the US than inside.  We’ve been ahead in the past because of things like NAPFA, life planning, the emphasis on the fiduciary.  These movements grew up here because of the entrepreneurial spirit of America. But it’s been almost 30 years since I joined NAPFA, and there’s still a lot to be done.

We’ve gone far in America, but we’re not the leaders any more. The leadership is now coming from governments in places like India, the Netherlands, Australia and the UK.  The regulators in those places have said “enough already.”

The industry in those countries recognized they needed to shift away from the heavy sales and commission system, because of lower and lower levels of trust. Those countries are now leading with ways that make Dodd Frank look like just a piece of paper.

Dodd Frank takes the consumer back to the Investment Advisers Act of 1940. We should have been there all along. Dodd-Frank is sort of Back to the Future.

The cozy relationship that grew up here between industry and government meant brokers could insist to the SEC, “No, we’re not advisors, we’re salespeople not subject to the Act,” and then turn around and tell the customers the exact opposite.  Dodd Frank basically says (as yet unconvincingly) we’re going to enforce the 1940 Act.  Meanwhile, other countries are going much further.

I’m not optimistic short term here in the US, though I continue to be an optimist about the long run.  Eventually the consumer wins.  The model we have in America is not designed for the consumer like it is in other countries. But I have faith we’ll get back there again.

The Stages of Maturity

TAA: In the Seven Stages you write about how the tension between the first two stages is particularly poignant—the crunch that happens when Innocence (Stage 1) comes up against Pain (Stage 2).  How can people recognize that tension?

George: Innocence and Pain are the first two of the Seven Stages, and there’s a bit of psychological approach here.  It’s like being in childhood.  Innocence is our beliefs about money; every single belief you can imagine is partial and incomplete.

The more insidious innocent beliefs are things like,  “Spend today because you never know about tomorrow,” or, “The only way to get money is to borrow it,” or, “Be ever on guard against those who’d steal it from you.”  Investment schemes will often play against that last one, as in, “Do you know how the rich really get their money?” I call these beliefs Innocence because they’re all incomplete. We pick these deep beliefs up early in life, from our parents.

Then comes the Pain, when your beliefs turn out to be wrong. Pain is primarily emotional.  You see your neighbors doing well but you don’t invest because your grandparents were from the depression. Meanwhile, your neighbors get yachts; so your particular brand of pain is envy.

Then, say in October of 1987 you go all in, and you do it on margin. More pain.  You get anger, sadness, despair, frustration, all of those things.  And people get in a loop, going back and forth between Innocence and Pain.

TAA: What’s the biggest mistake made by financial planners?  And by their clients, in their relationship to their financial planners?

George:  The biggest mistake made by financial planners is that even if they’re honest, have integrity, and care about their clients–they don’t know the clients well enough. They don’t know enough to know how much to save, how much to put into retirement, and how to help the client not worry so much and to live their dreams.

It’s a tragedy. They don’t know how to develop the biggest opportunity they have–the opportunity to talk meaningfully to their clients. If they could do that, they could say, “Hey, you can have that, let’s make sure you move toward your dreams.”  Instead, it’s all about shovels—not about holes.

And it’s even more of a tragedy for the consumer; they’re still thinking that it’s all about the money. They think their job is to find an advisor who can beat the market.

What they need is someone they can really trust; someone who has the capacity to help them articulate what they’re really inspired about in life, so that they can use money as a means to that end.

TAA: George, thank you very much for taking the time to speak with us. Your ability to link our material and our spiritual lives is unparalleled, and I hope we help sell you a few more books—they help people.

George: My pleasure.

Books We Trust: The Seven Stages of Money Maturity by George Kinder is the fifth installment in the Books We Trust author interview series.

Books We Trust interviews include:

How YOU Can Raise Trust in Your Organization

We’re pleased to announce the release of our latest eBook: People Behaving Badly: How YOU Can Raise Trust in Your Organization.

It’s the fourth in the new Trusted Advisor Fieldbook series by Charles H. Green and Andrea P. Howe.

Each eBook provides a snapshot of content from The Trusted Advisor Fieldbook, which is jam-packed with practical, hands-on strategies to dramatically improve your results in sales, relationship management, and organizational performance.

People Behaving Badly: How YOU Can Raise Trust in Your Organization reveals:

  • The three steps to constructive confrontation
  • What to do when constructive confrontation doesn’t work
  • When to walk away

P.S. Did you miss out on Volume 1, 2, or 3 of The Fieldbook eBook series? Get them while they’re still available:

  1. 15 Ways to Build Trust…Fast!
  2. How to Sell to the C-Suite
  3. Six Risks You Should Take to Build Trust

Take a look and let us know what you think.