Financial trust is on the up

Researchers at Nottingham University Business School’s Centre for Risk, Banking and Financial Services have been compiling data for its Trust and Fairness Indices since late 2009, but only in recent months has evidence of a revival at last emerged in earnest.

Investment companies have been among the major movers since the middle of 2013. Their gains can safely be described as significant. Their scores for both indices remain in negative territory but have rallied considerably. We need to ask why this has happened and, just as importantly, how the trend might be sustained.

It might be instructive to first look at those providers that have fared less well. Perceptions of the industry as a whole are recovering, but certain categories have seen their scores fall.

Brokers and advisers have comfortably led the way from the very outset. We are often told familiarity breeds contempt, but in the sphere of investment it has repeatedly been shown to generate satisfaction and reassurance. Customers have long appreciated the human touch. Yet the latest data reveal perceptions of brokers and advisers are on the slide.

One explanation for this is the RDR. More explicit charging has encouraged customers to re-evaluate the levels of service they receive relative to what they are paying, sparking a spell of retrospective resentment that may or may not endure as the longer-term impact of the RDR becomes clear.

The picture for banks is even worse. Their Trust Index score is the lowest since data collection began, suggesting any attempts made to repair their battered image in the aftermath of the financial crisis have failed.

Investment companies would do well to learn these lessons if they want their renaissance and restoration in the eyes of consumers to continue. Such failings are rooted in apathy and arrogance and are no longer easily forgiven, now that customers have become acutely aware of issues such as fee complexity, hidden charges and providers’ ingrained assumptions of unwavering client loyalty.

What many consumers would like to encounter is a unilateral commitment to building trust and ensuring fairness. They need to know the people and organisations they deal with are making their own efforts to understand what these principles mean from the customer perspective.

At present the phenomenon of ‘forced trust’ prevails. This stems from a conviction among disaffected customers that, having placed business with them on the basis of little more than blind necessity, they have no choice but to trust their providers, even though that trust has not been earned in any meaningful way.

This ‘fingers crossed’ philosophy sustains some of the most damaging stereotypes attached to the industry. It underpins a client-provider relationship that should satisfy neither party. It sustains accusations of facelessness and further entrenches the impression that levels of service are unlikely to transcend the functional and might even prove downright unavailing.

Historically, few firms have given too much thought to this concern. It would be heartening to believe this is changing and that some of the positive trends now emerging could be traced to more than the buoying bottom-line realities of an economic upturn.

It is vital to note, too, that consumer perceptions of the financial services industry in its entirety remain thoroughly underwhelming. The most cursory examination of the data is sufficient to confirm the road to redemption is still a long one.

Yet we are seeing steps in the right direction, and that has to count for something. Now the momentum must be maintained.

James Devlin is professor of Financial Decision-Making at Nottingham University Business School and director of the Centre for Risk, Banking and Financial Services

TRUST AND FAIRNESS INDICES

WHAT ARE THEY?

The Trust and Fairness Indices use responses from online surveys of thousands of consumers to gauge perceptions of the financial services industry. Providers are divided into seven categories – investment companies, banks, building societies, brokers/advisers, credit card companies, life insurance companies and general insurance companies – and awarded index scores of between +100 and -100. Scores below zero indicate a perceived lack of trustworthiness/fairness, while scores above zero reflect increasing trustworthiness/fairness.