And the Survey Says … Trust in Financial Services Still Ranks Low
The results of the 2013 Edelman Trust Barometer are out and the findings, for the financial services industry at least, are not encouraging. When survey respondents were asked how much they trusted certain industries “to do what is right,” once again banks and financial services firms found themselves at the bottom of the barrel — below such other industries as technology, automotive, telecommunications, and media. Only 50% of responders trust financial service providers to do the right thing (a slight uptick from 2012) — a damning indictment from those who must trust these institutions with their financial health and welfare.
The Edelman Trust Barometer is the firm’s 13th annual online trust and credibility survey sampling 26,000 general population and 5,800 “informed publics” ages 26-64 across 26 countries. “Informed publics” are college-educated individuals in top quartile of income in their country who follow public policy issues and read or watch business news several times per week.
Edelman points to the continuing and numerous scandals for the low levels of trust. The survey asked those who were familiar with the scandals “What do you think is the biggest cause of banking/financial services scandals?” Internal factors such as corporate culture driven by bonuses, conflicts of interest, and corporate corruption were cited by 59% of those responding. Only 20% cited lack of regulation.
Similar sentiments were expressed from those on the other side of the equation — investment professionals providing financial services. When asked what factor has contributed the most to the current lack of trust in the finance industry, 56% of the investment professionals CFA Institute surveyed for its 2013 Global Market Sentiment Survey indicated “lack of ethical culture within financial firms.” Only 16% cited poor government regulation and enforcement as the dominant factor in the current ethical climate.
Particularly interesting about this year’s results is that they indicate that the importance of performance is mattering less and the importance of behavior is mattering more when it comes to building trust. Five years ago, corporate reputation was driven primarily by operational excellence, but that category has plummeted to near the bottom of trust-building attributes, according to Edelman. Items such as “places customers ahead of profits,” “has ethical business practices,” “has transparent and open business practices,” and “communicates frequently and honestly on the state of its business,” rank higher than “delivers consistent financial returns to investors” when it comes to building trust. But the survey results also indicate that there is a large gap between expectation and performance in these areas.
Financial professionals agreed. “Improved ethical culture established and encouraged by top management” and “increased adherence to ethical codes and standards” were identified as the “most needed’ actions to improve trust according to 66% of respondents to the CFA Institute survey.
It seems clear form these two surveys that the majority of participants in the financial services industry, both customers and suppliers, agree that the commitment of firms and investment professionals to strong ethical principles and culture is the path forward to rebuilding investor trust. Tools such as the CFA Institute Asset Manager Code of Professional Conduct will help investment professionals get their house in order, repair a shaky foundation, and welcome in new neighbors. While strong investment performance is often seen by investment professionals as a surefire way to grow their client base, investors will not hire managers they cannot trust even if the performance is superior. Investment professionals and firms focused on performance to the detriment of establishing client confidence and trust will find themselves at a competitive disadvantage. As Edelman’s Trust Barometer concludes: “Companies, however ably or sincerely, that still operate by 2008 standards are missing opportunities to maintain and build trust among stakeholders.”
Photo credit: @iStockphoto.com/Mlenny
