How Do Investment Bankers Build Client Trust?

September 20, 2024

The investment banking industry is understandably very number-centric. In the whirlwind of data, spreadsheets, valuations, and analysis, private equity firms and investment banks can sometimes lose sight of the human element behind these numbers.

Businesses are powered by human passion and innovation. They are built by ambitious entrepreneurs and grown by dedicated employees and their creativity. These are the elements that make a business successful, desirable, and valuable.

That’s why building and maintaining trust with business owners and clients is paramount in the high-stakes investment banking industry. We asked several seasoned investment bankers the crucial question- “How do investment bankers build client trust?” to uncover the strategies they employ to establish and nurture client relationships.

Here’s how some of the industry’s leading figures foster trust and confidence:

Understanding unique needs

Brenda Spencer, Strategic Partnership Director at Benchmark International, highlights the importance of understanding each business owner’s distinct needs as the first step in building client trust.

“We invest the time to truly understand our client’s unique circumstances,” Spencer explains. “This approach ensures that there’s a strong fit for both parties from the outset. Before any engagement, we share our extensive knowledge with potential clients, equipping them with a clear understanding of what to expect once we bring their business to market. Educating business owners in this way not only fosters a sense of comfort but also builds trust in Benchmark International’s ability to deliver results.”

Spencer also highlights, “Our expertise, coupled with invaluable market feedback, enables us to consistently deliver high-quality transactions. This level of performance instills confidence in our potential clients, reassuring them that they are in capable hands.”

Demonstrating deep expertise

Richard Kestenbaum, Co-founder and Partner at Triangle Capital LLC underscores the significance of demonstrating a deep understanding of the owner’s situation and business to accurately assess client expectations. “You want to show that you understand a client’s situation, their business, and the process they need to undergo,” he noted.

Kestenbaum points out that investment bankers often possess knowledge that clients may not be aware of. “In some situations, there are things a client didn’t realize they didn’t know. These are all smart people, and they’ve spent their time – sometimes many decades – building a business, and we’ve spent many decades of our time figuring out how to help people like that maximize value. There’s always going to be things that we’ve seen or know of that can help them in the situation they’re in.”

Staying connected and engaged

Michael Rosendahl, Managing Director at PCE Investment Bankers, Inc. believes in the value of early and ongoing engagement for building trust with investment banking clients.

“We believe that engaging with potential clients well before they are ready to sell is crucial. By initiating conversations three to five years in advance, we can provide tailored advice that aligns with both the financial and personal goals of the business owner. It’s not just about maximizing value at the point of the sale; it’s about understanding their personal goals as well.”

Rosendahl also suggests that to build client trust, an investment banker should demonstrate sector expertise and maintain regular contact. “We make it a priority to meet with clients regularly, gaining a thorough understanding of their business, and keeping them informed about key market trends and relevant transactions. This proactive approach helps us build trust and ensures that our clients are well-positioned to achieve the best possible outcomes when they’re ready to make their move.”

Being a trusted advisor

Ji Sang Lee, Managing Director at Aleutian Capital Group emphasizes that an investment bank should position itself as a trusted advisor.

“I think it’s very important to go out there and position ourselves as a trusted advisor who can really help guide a client through a potential deal. A lot of that is just ongoing interactions, knowing they can count on us and being there to answer questions. We get them really comfortable with the expectations, time commitments, and the ups and downs of what the process might look like.”

Lee also notes that some advisors may use aggressive pitches to win business, but his approach focuses on honesty and transparency with potential clients to build strong relationships.

He mentions “I know there’s other advisors and bankers that would go in and pitch very aggressive multiples, just to try and gain the business. We try to set general expectations from our initial understanding, and I think that honesty and trustworthiness are key factors. In a lot of cases, we’re the first ones giving the owner honest and true advice.”

Building relationships that last

Understanding the intrinsically human aspect of investment banking and deal-making is what sets successful investment bankers apart from the crowd. Building strong relationships between clients and investment banks is a multifaceted process that involves demonstrating expertise, being receptive to client feedback, maintaining engagement, and investing time and effort to foster long-term relationship building.

By adopting these insightful strategies, investment bankers can build relationships with their clients on a solid foundation of trust that is required to successfully guide them through the M&A process.