[00:00:00] Intro: We’re saying goodbye to the rigid numbers and strict budgets, and putting relationships back at the heart of personal finance. This is more than a podcast, it’s an invitation to reimagine your money story and journey with us through a landscape of intuitive strategies and abundance. Join a community that nurtures transformative financial mindsets.

[00:00:25] Welcome to Intuitive Finance. I’m your host, Dylan Bain.

[00:00:36] Dylan Bain: It’s the first day of my MBA program, and I could not be more excited to be starting my graduate studies. My very first class was the class that I was most excited about because it was advanced auditing. I was going to graduate school to be an auditor. And so I was thinking that this is the place where I’m going to learn the most about this profession that I’m going to be going into, and I couldn’t be more excited.

[00:01:01] The professor walks in, he lays his notes down, and I’m in my chair, eager and so ready to start learning from this man, when he looks out at the class and he asks us our very first question of the class, which is, why do we audit? Why are we doing this? Why do we go through and look at people’s financial statements? Why do we go through and try to verify that they’re free of material misstatement? Why do we go through all this effort to attempt to put trust into these documents?

[00:01:31] And of course, every student hand goes up. It’s to defend capital markets! It’s to instill trust in our institutions! It’s to verify that there’s no fraud! And he tells us all these answers are wrong. He says to us, the reason we do an audit is for the fees. We do it for the money. And I was unbelievably shattered to hear this out of this man’s mouth. With all of his experience, his academic record, to say that we don’t audit for confidence or to protect financial markets or to help people have faith in institutions — we just started doing it for the money. And then what am I even here for? I tell that story, ladies and gentlemen, because for today, our topic is going to be talking about trust and financial institutions.

[00:02:22] And I think at this particular moment in time, it makes a lot of sense that most of us do not trust these financial institutions. But the problem for us is that our entire society runs on financial institutions. And your life, your marriage, your individual existence is itself its own financial institution. And it’s also a business.

[00:02:45] You can go back to my interview with Mr. Duey Freeman, who was just a hands-down great interview, but one of the things he pointed out during that interview was that when you have a couple, they’re engaged in a common economic objective, which is their marriage. That’s what they’re doing. And so if they don’t treat their union like a business, then of course the money is going to go missing.

[00:03:10] It’s really important for us to understand that we ourselves are financial institutions. And I kind of think about it, and I glibly kind of say like, eventually to my daughters, I will become the bank of dad. That’s a financial institution. To my wife, I’m a husband. I’m a father. I’m a lover. I’m a friend. I’m a confidant. But I’m also a source of income. I’m also the guy who does the books. I’m also the guy who pays the bills. I’m all of those things to her. And she is so many of those types of things to me. Our marriage itself is a financial institution. It’s a business.

[00:03:44] And so when we look at banks and we look at stock trading or crypto exchanges or your regulations or whatever it is, understanding that these institutions fundamentally operate on trust is key to us being able to develop good ones for ourselves.

[00:04:02] So the role of trust and financial institution is that trust is the foundation of all transactions. It literally doesn’t matter what you’re doing. Whether you’re just going to your job — you go to your job, you give up your time, you give them your labor, your skills, your expertise in exchange for the idea of a paycheck. But if you’re like me, they don’t pay me the day I’m doing the work. I have to wait. I get paid every other week. And so I’m trusting that my gift of my labor is going to be renumerated with funds. That they’re going to pay me.

[00:04:32] When I go to the grocery store, I trust that the price that’s on the can of beans is what I’m going to pay at the register. And I’m trusting that when I put in my credit card information, that the company that’s collecting that and then communicating with another financial institution is doing so in good faith. And they’re only communicating the information they need to actually complete the transaction, not just skim off the top. Every transaction requires trust.

[00:04:57] And if you’ve ever gone through, like buying a home, you might be familiar with the idea of escrow. Escrow is a fancy legal term to say, we have a third party who’s going to hold a bucket of money and do a thing we hired them to do. So when you’re selling your house, the house might go into escrow, that is the legal claim to the house transfers from you, the homeowner, to this individual that is going to hold the escrow, whether it’s a law office or a title firm or whatever. But that means that they have that asset now and then the money from the mortgage is going to come in, and they’re going to hold that, and then they’re going to switch. They’re going to give me the money, and that other person the house. And they do that as a way to generate trust, because how can I know that when I hand over all this money to buy a house, or someone’s saying — claiming they’re going to hand me a bunch of money to buy my house, that that money is legit. That that money actually exists. That they’re not just going to get the deed and then, oops, I forgot my checkbook. The way you do that is through a financial institution. All transactions require trust, and institutions provide that trust through a variety of different ways.

[00:06:05] Now, arm’s length dealing involves a third party who is not party to the transaction itself. And so like, if you stop and think about that, Venmo is a great example of this. We trust Venmo to be able to transfer the cash. They’re the intermediary, they’re the third party. And so they’re not involved in my transaction. Their whole exchange is to be able to move money from one place to another. That’s an example of this.

[00:06:29] Another example of an arm’s length transaction is exactly what I described in the grocery store. When you go into the grocery store and you look at the register, you’re probably going to see the letters NRC — and, you know, we’re all doing self-checkout now, right? So you can actually look at this stuff. So the register is a third party. It’s not actually the Safeway or the King Soopers or the Albertsons or wherever you do grocery shopping. It’s an actual company that’s handling an inventory system. They’re an arm’s length away from everyone else involved in this transaction, which means that we’re trusting them to record what I’m buying, be able to add all that up correctly, and be able to present that both to myself and then also the inventory system for the company.

[00:07:07] And then when you go over and you put your credit card in the thing — if you look there, you’ll probably see a label for a company called Verifone. And what they’re doing is they’re a data transference company. They’re again — they’re an intermediary, and so I’m trusting them because I don’t have to actually have them involved with the inventory. So they don’t have a horse in the race of how many cans of beans I just scanned. This is why we use them. That’s why they’re separate. And because they’re separate, they’re arm’s length, which means we have a greater deal of trust.

[00:07:33] Now, is there dealing within these? Of course. Do they collude? Absolutely. It’s just less likely. And that’s the whole point. No trust is absolute. It’s particularly when there’s money involved. When there’s money involved, you can’t trust people. And that’s just the reality. But these institutions are providing us with more trust than we would have if it was just you and I. And that is the key thing here.

[00:07:56] Institutions also provide trust through things like regulation and transparency. I myself have worked in capital markets now for almost a decade. And so when I look at this, there’s a regulatory regime that I have to audit to. That’s how I provide my services. Well, why are those regulations there? Because at some point, somebody broke the trust. And we’re going to talk about that here in a second. And because they broke that trust, that means we put the regulations in saying we need to be able to trust you, Mr. Bank, or we need to be able to trust you, Mr. Importer/Exporter. And so therefore, we’re putting in these regulations and we’re going to hire this third party as an auditor to come in and actually check.

[00:08:32] So when I was working in the capital market space with a public accounting firm, that’s what we did. Google would hire us to come in and look at their financial statements and verify that they were materially correct, which means that, yeah, there might be errors, but they’re not going to be huge errors that would change somebody’s thinking. Those regulations provide the ability to buy and sell stocks with some confidence that you at least know something about the company.

[00:08:54] And in fact, it’s our regulatory regimes and the transparency that we have with it — transparency with GDP data, employment data, how these, the data is available in public for everybody. But it’s a U. S. centric thing, like not every country has this. And this is why when people are like, wow, the U. S. can’t be trusted. Well, if the U. S. can’t be trusted, who’s going to replace us on the world stage, because we’re the most transparent and trustworthy there is? And that’s kind of saying something. So understanding that having that third party provides trust, but same with the rules, regulations, and, you know, transparency and laws, it allows also for further specialization in the economy.

[00:09:32] So think about this for a second. When you buy, say a stock that you go into, you know, whatever app you’re using and you say, I want to buy one share of ExxonMobil. Okay, well, you’re trusting that that broker is actually going to serve as a custodian, help settle the funds, and actually transfer the stock ownership to you. So you’re trusting all of that because there’s a regulatory regime and transparency around that activity for this company. And this means that you yourself don’t have to go do all the due diligence and homework and verifications in order to purchase that stock. So therefore, you have more time to specialize. You don’t even think about it.

[00:10:13] When you actually swipe your credit card, you don’t think about, like, did the data connections — were they solid? Did the right data get transferred? Like, you don’t think about any of that. Instead, you have a specialization with an economy that the people who made those machines don’t have. If you go back far enough, if you were a merchant, think about all the different things you’d have to do in order to be able to actually facilitate business. You’d have to know what counterfeit coins look like. You’d have to be able to identify fake silver. You’d have to be able to do all of these things, which is not the actual thing you’re in business to do. So by the fact that we have these third-party institutions and these financial institutions and systems, it allows us to not have to think about it and do all the different arts and crafts that go along — if we didn’t have that.

[00:10:58] The last thing about the role of financial institutions, particularly in the trust space, is that it reduces the friction in the system. Think about how easy it is to buy a can of beans. You just literally walk down the street to the grocery store or drive or, you know, teleport or whatever you do. You pick up the beans, you go to the thing, you scan it in the register, you swipe your card, you walk out the door with it. Done.

[00:11:20] That is a really easy transaction because you don’t have to think about the quality of the beans. You don’t have to think like, well, does this company — have they recently been sued for botulism? Have they killed anybody lately? Like we had to do this type of thing in the 1920s, which put a lot of burden on the consumers, which meant that every transaction had friction. Now, you can go to Amazon and with one click, buy stuff. It reduces friction in the transactions, which of course, means that the economy works far more efficiently. So the role of trust in financial institutions is absolutely critical. But of course, it’s not absolute, and they break down.

[00:11:54] I got three examples — and there are tons of examples in which trust in institutions has completely failed us, particularly our financial institutions. But the top three that I have that I think are worth talking about are the Great Depression, the Great Recession, and Bernie Mandoff.

[00:12:08] And the Great Depression, one of the things that happened was when banks started to fail. You’d be like, oh my God, ABC bank just failed. But I bank at XYZ bank, they might be next. And so what happens is XYZ bank might be actually financially completely stable and completely safe, but with me and a hundred of my best friends show up and demand my money out of that bank, what that does is it lowers the bank’s capital reserves. And if they can’t pay, they’re no longer solvent. Because remember, banks use a fractional reserve system, which means that their money — they’re only holding a certain percentage of it. The rest of it’s lent out for car loans and bank loans and business loans and home mortgages and all that other stuff.

[00:12:50] So in the Great Depression, there was no backstop to these banks because if the bank failed and you had your money in the bank, you lost everything. There was no FDIC, there were no banking regulations, there was no SEC. None of this stuff existed. This all came after the Great Depression. But why? Why did it come after the Great Depression?

[00:13:09] It came because the thing that we had to fear was fear itself. That’s a quote directly from FDR from one of his fireside chats. “The only thing we have to fear is fear itself.” What was he talking about? He was talking about the fear that the banks would fail. The fear that the financial institutions were not trustworthy, and that was what was freezing up the economy. He had to restore trust, which is why things like the Federal Deposit Insurance Corporation or FDIC came into being. If that bank fails, don’t worry. We have insurance. It will make you whole. And this has stopped bank runs. We don’t see a whole lot of them anymore. The current example is notwithstanding, but that had more to do with cryptocurrency than it did with traditional banking.

[00:13:49] So the Great Depression had a lot of these different things that really shook our faith, but the Great Recession did too. Because in the Great Recession, we had all these mortgages that blew up, and when they blew up, the banks — they had invested in those mortgages, those collateralized debt obligations, you know, in the different tranches and everything that was part of the really complicated way that they were doing this at the time. And when those failed, the banks failed. Like, they lost their shirts. And so as a result, when those banks started to go down, the insurance companies that had sold the insurance on those same products to the bank — and it sold, if you’ve ever seen the movie, The Big Short. You know that at the end of the movie, they’re worried about the insurance companies not be able to pay the insurance they took out on the loans they knew would blow up.

[00:14:32] And so again, we see this case in which our trust in financial institutions was shaken. And of course, what was the very first thing that we did as a nation to try to head off this crisis? Well, we tried to prop up the banks and we bailed out the automakers. We did these things to try to restore trust and restore faith. That’s a big part of this.

[00:14:54] And then of course, there’s the famous case of Bernie Madoff. Bernie Madoff, if you don’t remember, was a famous legendary fund manager. He was seemingly capable of being able to produce a 12% return no matter what the market did. It was 12% every year. It was miraculous. And of course, part of the problem there was it was a Ponzi scheme. He was fraudulently running his enterprise for the tune of $65 billion. So when that happened, he was considered a titan. But in retrospect, it was easy to see because the people doing, auditing his books were not really good auditors capable of doing an audit for a $65 billion fund.

[00:15:37] And when you looked at it, people were like, oh my God, what’s going to stop this from happening again? And this is where a lot of, you know, people started asking, well, should I just have my money in cash? Should I just pull it out? Cause I can’t — if I couldn’t trust Bernie, I can’t trust anybody else. And so our trust does get broken, does get betrayed. And as we continue to move forward, our trust in our financial institutions is critical for the economy to continue to function.

[00:16:05] So this all kind of leads up to a question of how do we foster trust with our clients, with our families and everyone else that’s connected to our personal financial institution? How do we do that?

[00:16:17] And I’m going to give you five things that you can do that will help you build trust with your clients if you are in the financial industry, or really, any clients that you have. Whether your client might be somebody at work, your client might be your kids, your client might be your spouse, or even that client might be you. How do you generate trust in these institutions?

[00:16:40] Number one, transparency and honesty. This one should be completely self-apparent, but it’s not. People will sit there and say, well, if they just don’t look at it, then it’ll go away. Well, that’s a terrible strategy because if you don’t look at it, it just gets worse. You need to be transparent about where you’re at on things. You need to be transparent about what you’re doing in life. Particularly if you’re in a committed relationship, and you’re in debt? You need to tell that person that, hey, you’re about to marry this person, and I’m in debt.

[00:17:09] And in fact, I’ve even had this in my personal life. I served as best man at a wedding for two very dear friends of mine that I’m still friends with to this day. And I remember, it was like a week before the wedding and the bride calls me and is like, we gotta talk. And I’m like, oh shit, she’s gonna call it off. And what she was doing was she was saying, that she didn’t want her future husband — her now-current husband — to be saddled with somebody who had as much student debt as she did. Why does she have so much student debt? Because she was going to medical school to be a doctor, but she was terrified about it. She didn’t want to tell him how much it was. And I told her, you need to be transparent and honest. And she was. And he said, sounds good. And they got married. Being transparent and honest is one of the best ways for you to start generating trust in your dealings with yourself and with your clients and with your loved ones.

[00:18:04] You know — hi, are you having a bad day? Yeah, I’m having a bad day. Okay. Are you upset at me? Yes, I’m upset at you. And I still love you. I love you right now. Transparent and honest. Hey, I know we agreed that we weren’t going to spend any more money this month, but I couldn’t help it. And I bought some fried chicken sandwiches. Transparent and honest. I’m really scared about taking out this car loan. I don’t think it’s the right thing for us. Transparent and honest.

[00:18:27] Alright, number two. Consistent communication. And when I say consistent communication, I’m not talking about the idea that like, you should just have the same message, really get into that neuro linguistical programming by repeating the same thing until it goes into their head. No, that’s not what I’m talking about. What I’m talking about is consistent communication where I talk to these people on a regular basis. That I’m predictable with how and when I’m going to communicate.

[00:18:51] I — we sit down, we have a budget meeting at one o’clock every Saturday. That’s set in stone. It always happens. And I’m using that example from my personal life. Typically, if we can’t make the one o’clock on Saturday, then we move it to Friday. But we have consistent communication about our budget every single week, so my wife and I are on the same page. We know where we’re at in the month. We know where we’re going. We know what unexpected things have come up so we can make adjustments. It’s consistent communication. She can trust that. And I can trust that.

[00:19:19] Consistent communication is key, especially with your kids. Never assume that your kids actually understand that you love them or that you’re proud of them. You need to consistently communicate that to your kids. You need to consistently communicate to your clients. Hey, here’s where the status of the project is. Here’s where we’re at. Here’s the things we’re worried about, but here’s our solution so you shouldn’t be worried about them any more than I am. Consistent communication. Because they’re not in the dark, and if that communication is transparent and honest — over time, that’s going to create trust. Like Duey Freeman likes to say, you create contact. Contact over time creates connection. That’s what we want, and that’s what we’re going for.

[00:19:54] Which brings us to number three. Number three, set clear expectations. So when you’re dealing with your finances, and you’re having this conversation with your loved one, or even with yourself, you can say to yourself, here are the goals I have. X, Y, Z. Done. It’s clear, it’s concise, we know what we’re all doing here. And if that person doesn’t agree, so if you say that out loud and somewhere inside of your body, you’re like, you know, that isn’t true. Okay. Change the expectations, but make them clear. Because then people know what they get. They know what their buy-in is. You know what the price they have to pay to be at the table is. And they know what they’re going to walk away with when they walk away from the table. These things are key.

[00:20:34] So if you have clear expectations and you’ve had consistent communication, and the communication has been transparent and honest, they’re going to have a lot of trust in those clear expectations.

[00:20:43] Number four, long-term relational focus. I’ll never forget this. I walked into this car dealership. My wife had just gotten in an accident and totaled our car. It was terrible. And I walked in the car dealership and I was like, I need a car. It’s got to be a used car. I need the cheapest car you got. And the salesman sat down with me and he said, I need 30 minutes of your time so I can get to know you. And I said, I just need a — I need a car, dude. And he said, I understand that, but I’m going to give you this car as cheap as I possibly can get it because I can tell that you’re up a creek, but I want to sell you your second, third, and fourth car.

[00:21:20] And so when we worked the deal, I knew he didn’t make any money on it. That’s how cheap he gave it to me. Cause that’s what I was. And you know what I did in fact, buy the second, third and fourth car off his used car lot, because he was transparent and honest. He was consistent in communication the whole way along. He set clear expectations of what we were going to do, but he also had this long-term relational focus.

[00:21:45] And when I left Flagstaff, which is where this guy was working, and I moved to Phoenix, I would — the last car I bought from him, I drove from Phoenix to Flagstaff two and a half hours because I was buying a car from that guy. Why? Because he fostered this long-term relationship that we were having. Him as the salesman, me as the person behind the car. He sent me birthday cards. He sent us anniversary cards. This guy understood that he was developing a relationship, that he wanted to be selling me my kid’s car. He wanted me to be selling me my grandkid’s car. And it was no wonder that he got promoted very quickly to sales manager.

[00:22:21] But now stop and think about this in terms of sitting with yourself or sitting with a loved one. If you sit there and go like, I got to win. You’re going to be winning that one thing at the expense of the longer term relationship that you’re trying to foster. When you got to look at it and say, does 90-year-old me need me to white knuckle my way through this budget and punish myself for the spending that I have, or does 90-year-old me need me to have compassion and curiosity and the ability to learn right now?

[00:22:54] Because we’re building relationships not just with ourselves and with our loved ones, but we’re building with our money and with our future selves. So when you take that long-term relational focus, everything comes into clear focus for you with setting expectations, with consistent communication, with transparency and honesty.

[00:23:12] I think about this a lot because when people say like, well, Dylan, why do you train so much? It’s like, well, because I’m training to be 90. Because 90-year-old Dylan needs me to do this. Because I have a relationship with me when I’m 90. Even though I’ve got more than a half a century until I get there.

[00:23:28] And then of course, lastly, seek feedback. And just understand that feedback is people helping you get better. No matter what the feedback is. You know, Dylan? You did a really bad job there, tell me more. Help me understand, because I want to make sure that I serve you better next time. And this includes with yourself, like, how did that work for me? How did that make me feel? Was I nourished by this thing? Was this a good idea? This is how you generate trust. Because when you’re seeking feedback, if you’ve established your relationship with this person, looking at a long-term relational focus, they’re more likely to give it to you.

[00:24:02] And that feedback gives you the ability to adjust course. So that you can be better. So that you can achieve your goals. So that you can have a check-in, and the check-in means something, even if it is just with yourself. Maybe especially if it’s just with yourself. And I understand what it’s like to have to look at this and go like, God, everything just feels like a mess. I don’t really trust banks. I don’t trust financial institutions. I just don’t trust myself with money, let alone my spouse with money. I don’t trust my kids with money. And I’m fairly convinced that everyone around me is trying to screw me. Okay, that’s great.

[00:24:37] If you don’t know where to start, start with you. Start being transparent and honest with yourself. Start consistently communicating with yourself. Set clear expectations for yourself. Understand you have a long-term relational focus with yourself. And seek feedback from yourself.

[00:24:51] And I know exactly what it’s like when you have to look at it and say, the world might be insane. Everybody might have taken the crazy pills but me! But I’m gonna be the one guy who’s going to be honest. And that’s what I decided in that class, in that story at the top of the show, where my audit professor comes in and says, why do we audit? We audit for the money, for the fees. And I thought to myself, that ain’t me. Yeah, I get paid for my expertise. Yeah, I get paid for my time. But I’m going to be the one guy, the one person in the room, even if it is just me, who’s going to be honest and trustworthy. Because I want people to believe in being able to put stock into the brand that is Dylan Bain. That if nothing else, we can always get a straight story out of him.

[00:25:32] And that’s how I built my personal brand. And it’s funny because when I look back at it, I look back — I left teaching, a career I loved because I was asked to commit fraud and I wouldn’t do it. And then when I left public accounting, one of the major motivating factors, including the pay and the hours, was the fact that I had a moral disagreement over how this accounting was being done on this one client. And my most recent job that I just recently changed from, it was a very similar thing.

[00:26:03] My personal brand was built on trustworthiness and honesty. And what’s crazy is that in all three of those cases, the people left behind, they got fired. They went down for their dishonesty. But me, my personal brand of trustworthy and honest — I’d be the one guy in the room who’s willing to say, you can trust me because I’m going to be transparent and honest. I’m going to consistently communicate. I’m setting clear expectations. I have a long-term relational focus. And I will seek feedback and adjust fire as needed. Has led to promotions, job offers, and far more stability in my life than literally anything else.

[00:26:39] It’s not easy. It’s just worth it. And it’s worth it for you to do, too.

[00:26:44] Outro: Thanks for listening. The conversation doesn’t end here. Please share this show with friends and make sure you keep up with all the latest updates on Instagram and Threads @TheDylanBain, and dive deeper into the world of finance with me at DylanBain.com where you’ll find insights, resources, and strategies to reimagine your money story.