Signs of improving trust and confidence in the Financial services industry
The bedfellows of trust and confidence in financial services products and providers have been the source of many conferences, reports and initiatives in recent years.
Restoring trust and confidence is one of the key objectives of the industry particularly in terms of long-term savings and investment products where the emergence of a substantial savings gap is seen as a direct result of a lack of trust and confidence in the industry. The FSA in their 2003/04 Annual Report commented on dealing with past mis-selling:
‘The recent episodes of firms selling customers inappropriate products about which they were inadequately informed have damaged public confidence in the financial services industry. Trust needs to be rebuilt and we have been addressing this on various fronts’
The need for firms to agree with the FSA their own terms for Treating Customers Fairly (TCF) is one of the key policies through which the FSA is seeking to rebuild trust.
At the same time the need for confident and capable consumers with greater understanding of personal finance is a key objective of the work of the FSA. In a Mintel study ‘Understanding financial information’ in autumn 2004 only a third of adults said they had a very good or good understanding of personal finance with 27% (some 13 million adults) saying they had little or no understanding of personal finance. It has been all too easy for poor selling practices to develop.
Trust, confidence and engaging with consumers
‘Trust and re-engagement with the consumer’ is an ongoing programme being developed by the Financial Services Forum (www.fsforum.co.uk) – comprising of senior industry marketers, academics and commentators to address the key issues.
Trust arises from a number of service aspects including responsiveness, frequency of interaction, reporting communication, timeliness and advice. Close attention to such factors should result in growing customer confidence.
However the intensely competitive nature of financial services with great focus on sales revenues often means that not everything is as transparent or clear as it could be. Too often Key facts and Terms and conditions on product offerings are written to accommodate lawyers and the FSA rather than the consumer.
A general lack of trust in big institutions – and of their habit of ‘spinning stories’ means that surveys show for many people it is friends and family that people have trust in for advice and ‘translation’ of what media messages really mean. Consumer scepticism is high with consistent brand messages and experiences needing to be delivered by institutions to rebuild trust.
The JGFR Trust and confidence survey
To provide a benchmark for institutions to view trust and confidence in financial services providers JGFR commissioned GfK Martin Hamblin to ask 1,000 adults aged 16+ in December 2003:
How much trust and confidence do you have in your financial services provider to:
Greatest trust and confidence found in the ability of financial services providers to operate accounts efficiently and conveniently
Account service and ease of account access to customers are key aspects of a financial services relationship. Loss of confidence in the ability of an institution to operate accounts efficiently could easily lead to accounts being closed. On this measure 48% of respondents indicated they had trust and confidence all the time that their accounts would be operated efficiently and conveniently. 75% said they would be operated efficiently and conveniently all or most of the time. At the other extreme some 3% indicated that none of the time did they have trust and confidence that their accounts would be operated in the specified manner.
Least trust found in sales of suitable products to meet customer needs
Of the four categories, the least trust is in the ability of institutions to sell suitable products to meet respondents’ needs. Only 24% of respondents believed they were sold suitable products ‘all the time’ while a further 26% thought they were sold suitable products ‘most of the time’. A half of consumers - some 24 million consumers - are unconvinced of the industry’s ability to sell suitable products to meet their needs.
Women far more trusting of financial advice than men
Giving financial advice is moving to centre stage in the business models for many financial services providers. The need for the quality of advice to improve is shown in the survey that asks people whether they have trust and confidence in financial services providers to give them good advice.
Only a third of survey respondents believed that they received good advice all the time (25% most of the time), with 13% indicating that they had little trust if any. Women are far more trusting than men in getting consistently good advice (38%) compared to 27% of men. By age the baby boomer 50-64 year olds had the most mixed views about advice. While 35 % believed they received good advice all the time, 18% had little confidence in the financial advice they received. Regionally more people believed they received good advice in the West Midlands and the least in London.
A relative absence of well-trained and happy staff among financial services providers
Well-trained and friendly staff create a warm and businesslike atmosphere and can lead to customers becoming advocates for the organisation. Friends and family are key providers of financial advice but that advice may be simply information as to who to approach. Referrals as a result of the service received by a happy customer can be an important source of new business.
Just under 40% of survey respondents trust their financial services provider to ensure its staff are well-trained and friendly all the time (27% most of the time). The over 65s (47%) and 16-22 year olds (42%) had the greatest belief that this would always be the case. 23-29 year olds are the least trusting (30%) in financial services providers to ensure well-trained and happy staff.
Far less trust and confidence among better educated
People who left school at primary level – aged 15 or under with no educational qualifications- are the most trusting particularly in terms of financial advice. Graduates are far less likely to have trust and confidence in the industry and indeed in the future may bring about much greater change as they are likely to switch/re-designate providers more often (possibly having multiple accounts) with far less loyalty than older, less well-educated/informed, complacent/trusting deferential people.
Trust and confidence in Bank of Scotland top among main financial services providers in all four aspects
The survey also asked about which financial institution people regarded as their main financial provider. For many people their main financial services provider will be where their current account is held. Among main financial services providers Bank of Scotland came top in all four categories and overall as the most trusted of the main financial services providers.
A big improvement in trust and confidence in financial services among consumers in 2005
Last autumn Mintel used the almost identical question in their report ‘Regulation and the erosion of margins’ with results showing an improvement in trust and confidence across all categories on an ‘all or most of the time’ basis, with the greatest rises in account operating efficiency and giving good advice on financial matters.
The surge in consumer activity in the second half of 2005 across savings and investment products reported in the Financial Activity Bulletin suggests trust and confidence is returning with all major savings and investment institutions showing much better business volumes in their recent results presentations. Consolidation of recent stock market gains will help to restore investor confidence in longer-term investment institutions although the industry will always remain vulnerable to major shifts in key economic variables.
On the borrowing side the strong growth in employment together with low interest rates has enabled consumer spending in recent years to move ahead sharply. Confidence in the borrowing arms of financial services providers has been good. However with growing evidence of more people struggling to balance commitments as unemployment continues to rise and incomes are squeezed resulting in credit quality under more pressure, the test will be on providers to treat their borrowing customers fairly.
Both trust and confidence will remain fickle bedfellows and need to be paid constant attention to by financial institutions.
For copies of the survey data and further information on our work in this area please contact John Gilbert at 0208 944 7510.