Despite a recovery from the depths of the financial crisis, nearly half of individual investors say they trusted financial services companies less in 2010 than the previous year. Edelman’s second annual Trust in US Financial Services Survey found that of the 46 percent of respondents whose trust levels declined, most (57 percent) cited financial services companies “acting in a greedy manner” and 18 percent maintained that the “industry itself has made the problems worse.”
In a separate study released last month at the World Economic Forum, the 11th annual Edelman Trust Barometer—which measures trust and credibility in business, government, NGOs and media among informed publics—found that trust in banks collapsed in the US, with banks dropping from the number three spot in 2008 (71 percent) to second from the bottom in 2011 (25 percent), tied with financial services.
“The way people perceive companies has changed significantly since the pre-crisis era, and the reputations of financial services companies in the U.S. have been some of the hardest hit,” says Matthew Harrington, CEO, Edelman US. “The decline in trust in these institutions, even as the financial markets were recovering, underscores the long road back they must travel to re-earn the lost trust.”
Another survey finding further illustrated the decline in trust. Half of the respondents said they need help managing their money more effectively, assuming they can find a firm they trust and respect, but six in 10 are uncertain of the value that large financial services firms can provide in managing their money.
Considering the factors most important to the overall reputation of a financial services company, investors ranked “honest communication” (91 percent) and “open and transparent business practices” (84 percent) at the top. Traditional marketing mix tactics—“fair and competitive prices” (75 percent), “available customer service” (74 percent) and “website with easy financial transactions” (62 percent)—ranked lower, as did “consistent product delivery” (75 percent).
“While content-rich websites and fast and responsive customer service are, no doubt, important, they are ‘table stakes’ to investors,” says Jeff Zilka, general manager, financial communications, Edelman. “What consumers are hungering for, and what financial services companies must deliver if they are to restore their customers’ trust, is honest communication and the reality of open and transparent business practices.”
Only 49 percent of respondents said they trust financial institutions in general. Community or regional banks scored highest in the survey (67 percent), with mutual fund companies second at 55 percent. Life insurance companies (42 percent) and property/casualty insurers (37 percent) ranked in the middle of the pack but well below the 50 percent level, and investment banks (35 percent) and private equity firms (32 percent) were least trusted.