The Charm Offensive

Assessing Trustworthiness in Investment Business Leaders: A Comprehensive Approach

When considering business leaders as a group, it becomes apparent that being charismatic is not necessarily a valuable asset. It is widely recognised that charm and charisma can be wielded for both positive and negative purposes.

As investors and investment brokers, what we truly seek is an experienced, honest, and competent visionary investment business leader who possesses determination and resilience. In this context, charisma can be seen as an added advantage. However, when leaders lack substantial qualities beyond charisma, disaster looms not too far behind. While they may have the ability to accomplish remarkable feats, these achievements often occur in the wrong areas, and unfortunately, at the expense of their followers and investors.

Distinguishing between such leaders is not always a straightforward task. However, it is not always necessary to do so. In many cases, conducting thorough due diligence will reveal deficiencies, such as financial or operational shortcomings, before reaching the point of decision-making. Continue asking pertinent questions, and if you encounter evasive responses sooner than expected, it is wise to exercise caution and reconsider your involvement.

A real (and personal) example

For instance, let’s consider the real-life case of a well-known international business guru who was attempting to raise funds from his own fan base. They are a highly-regarded and charismatic leader, yet several years ago, when we asked about any “due diligence pack” for their private group investment offer for new business venture, their surprised response was along the lines of, “Invest in me because you know me and what I’ve achieved.”  This kind of attitude implies a belief that one is exempt from the scrutiny of due diligence because of an established reputation and apparent track record. While trust in a leader is undoubtedly important, it is not sufficient on its own. Many individuals who have suffered from failed investments lament that they trusted the leaders blindly, without delving deeper into their due diligence investigations. 

Trust must be earned and, once established, should still be subject to examination. The answer is to transform the rhetorical question, “How do I know I can trust them?” into a genuine inquiry and embark on an investigative journey to uncover the truth.

Let’s get ACTIVE

Part of the risk of listening to a charismatic leader is that for the listener, it’s a largely passive experience. The remedy to this is to be ACTIVE in that whole process of assessing trustworthiness. Here are the six ACTIVE tests of trustworthiness we’ve discovered that can be applied to check out the reliability and credibility of individuals:

  1. Accountability: Trustworthy individuals or sources take responsibility for their actions and are accountable for their decisions and outcomes. They admit their mistakes, rectify them when necessary, and are willing to provide explanations or justifications for their choices.
  2. Consistency: Trustworthy individuals or sources consistently demonstrate reliability and stability in their actions, behaviours, and statements. They maintain a consistent track record and do not frequently change their positions or contradict themselves.
  3. Transparency: Trustworthy individuals or sources are transparent in their intentions, motivations, and actions. They are open and honest about their processes, methods, and biases, and they disclose relevant information that may influence their credibility.
  4. Integrity: Trustworthy individuals or sources demonstrate a strong sense of integrity. They adhere to moral and ethical principles, consistently acting in an honest, sincere, and principled manner. They prioritise doing what is right over personal gain or convenience, and they maintain their integrity even in challenging or tempting situations. Integrity ensures that individuals or sources can be trusted to uphold their values and act in a manner that aligns with ethical standards, which further enhances their overall trustworthiness. If they have got into hot water in the past, how have they dealt with it? Putting their investors before themselves, or the opposite?
  5. Verification: Trustworthy individuals or sources can be independently verified through external means. They provide evidence, references, or citations to support their claims and assertions, and their information can be cross-checked and validated through reliable and credible sources.
  6. Expertise: Trustworthy individuals or sources possess expertise or knowledge in the specific area they are being trusted for. They have a demonstrated understanding and competency in their field, often backed by relevant qualifications, credentials, or experience.

That’s our ACTIVE formula. It’s important to note that these tests should be applied in a critical and thoughtful manner, considering multiple factors and corroborating information, to make well-informed judgments about trustworthiness.

Time to get practical

Let’s develop this and look at some practical ways to diligently test investment leadership teams using these six ACTIVE principles of trustworthiness:

  1. Accountability:
    • Evaluate their willingness to take responsibility for their mistakes or shortcomings by examining their track record of admitting errors and making amends.
    • Assess how they respond to constructive criticism or feedback, whether they acknowledge their limitations and strive to improve.
    • Observe if they have established systems or mechanisms to ensure accountability, such as feedback loops, performance evaluations, or ethical guidelines.
  2. Consistency:
    • Review their past actions, statements, or positions on specific matters to identify any inconsistencies or frequent changes.
    • Seek references from reliable sources who have had long-term interactions with the individual to assess their consistency over time.
    • Engage in ongoing discussions or interactions to observe if their actions and statements align consistently.
  3. Transparency:
    • Ask direct questions about their intentions, motivations, or potential biases and evaluate the openness and clarity of their responses.
    • Request them to disclose relevant information or sources that support their claims or viewpoints.
    • Conduct background research to gather information about any past controversies, conflicts of interest, or lack of transparency associated with the individual.
  4. Integrity:
    • Assess their adherence to ethical standards and principles by evaluating their past actions or decisions in morally challenging situations.
    • Seek feedback or opinions from people who have witnessed their ethical conduct or have knowledge of their personal values.
    • Observe if they consistently display honesty, sincerity, and a strong moral compass in their interactions and behaviours.
  5. Verification:
    • Cross-check their claims and assertions by verifying information through reliable and credible sources, such as peer-reviewed studies, official reports, or trusted publications.
    • Evaluate their use of citations, references, or sources to support their statements and determine their reliability.
    • Engage in fact-checking exercises or discussions to assess the accuracy and validity of the information they provide.
  6. Expertise:
    • Examine their educational background, qualifications, certifications, or professional affiliations to gauge their level of expertise.
    • Assess their track record, such as past achievements, projects, or publications, to determine the depth and breadth of their knowledge.
    • Seek testimonials or recommendations from recognised experts or authorities in their field to verify their expertise.

And in the end

You can tell we like lists, and for good reason. It helps clarify and focus our thinking, and makes sure we don’t waste valuable due diligence time on the things that ultimately do not really matter to get the investment safety level we are expecting and hope for. We tackle sensitive topics like trust head on, because frankly, somebody has to…

These practical approaches, combined with professional investment due diligence (we can help with that too), provides insights into an investment’s trustworthiness across all six dimensions – and avoid those tragic “but I trusted them” sentiments that can come from an over-reliance on a charismatic investment business owner.


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