An Analysis of The State of Stakeholder Trust in the Financial Services Industry
Since the global financial crisis, consumers have lost trust in the financial services industry. But it can be rebuilt.
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February 01, 2021
Consumers’ lack of trust in the financial services industry has negative consequences for them, the financial sector, and the wider economy. But industry leaders agree that better relations are possible.
In a study commissioned by The American College Cary M. Maguire Center for Ethics in Financial Services, researchers spoke to 15 senior executives at top U.S. insurance and asset management companies.
Most agreed that, in the wake of the global financial crisis, consumers lost trust in financial institutions and professionals. Looking ahead, consumers are demanding that financial institutions:
- Make meaningful contributions to societal challenges such as climate change.
- Offer transparency and open communication.
- Simplify complexity and explain products clearly.
- Deliver a strong digital experience.
Unfortunately, even firms that are committed to improving relations and being held accountable have found it hard to rebuild trust in the face of various roadblocks, including:
- Widespread bias against large financial institutions, which devalues firms’ efforts to improve.
- A tendency to lump financial institutions together irrespective of sector, which obscures individual firms’ progress.
- Short-termism and shareholder pressure to deliver growth, which threaten to undermine long-term, customer-focused initiatives.
- An inability to change the underlying structures of the industry, which leaves firms powerless to control things like independent distributors’ behavior.
Navigating a Way Forward
Despite the challenges, enhancing consumer trust is a key strategy for financial institutions and professionals that want to thrive in a changing environment (see Table 1).
Table 1: Emerging Trends Accelerating the Role of Trust as a Practice
|Serving Diverse Consumers|
|Dialogue with Regulators|
By focusing on building trust and delivering the types of products and services that consumers truly want, financial firms can chart a safer path through this changing environment. Greater trust will help firms attract younger consumers, adapt to diversity, deal with competition from tech-driven startups, manage the risks (and enjoy the benefits) of AI, and work more effectively with regulators.
While building trust may be challenging, for far-sighted firms, the benefits could be huge.
To learn more about how firms can tackle the roadblocks that make trust-building challenging, download the full research report now.