Despite the recent stock boom, nearly half of investors said they trusted financial services companies less in 2010 than in 2009, according to an Edelman survey released today.
This deep distrust of financial services firms seems a wide-open opportunity for independent financial planners who can build one-on-one relationships.
Forty-six percent of respondents said their trust had declined, 57% cited financial services companies "acting in a greedy manner" and 18% maintained that the "industry itself has made the problems worse."
The Dodd–Frank Wall Street Reform and Consumer Protection Act hasn’t restored public confidence. In fact, 56% of those surveyed believe that financial institutions need to be regulated more, two out of three believe Dodd-Frank doesn't cover some problems, and 65% percent believe government agencies, financial services companies and Congress must work together more to address the problems facing the financial services industry.
When it came to their own finances, half of the group said they need help managing their money more effectively – assuming they can find a firm they trust and respect – but six in ten are wary of large financial services firms.
Respondents had household incomes of at least $50,000 and at least $10,000 of investable assets. A wealthier group--with an annual income of more than $150,000 and investments of more than $100,000--was less wary, but not by much. Only 52% said they trust national banks and 49% trust brokerage firms, compared to 45% percent and 43% for the survey respondents as a whole.
"While content-rich websites and fast and responsive customer service are, no doubt, important, they are 'table stakes' to investors," said Jeff Zilka, general manager, financial communications, at 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."
In another 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 nationally, with banks dropping from the No. 3 spot in 2008 (71%) to second from the bottom in 2011 (25%), tied with financial services.
"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, said Matthew J. Harrington, CEO, Edelman U.S.