Why The Trust in Financial Services Is At It’s All Time Low

Whatever is the kind of business that you are running, gaining a profit is definitely at the ultimate core.The reason why the businesses needed profit is not solely due to its commercial nature but also because these businesses need to improve their goods and services across the time so that the customers will continue to patronize them as their product or service of choice. This modicum of trust thrives to develop the mutualism between both parties. And the financial sector is not completely immune from the volatile economic patters of the consumers. Indeed, this is the backbone of its operation and existence.

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Realistically, each financial service needs the trust of its customers. Without trust, these institutions will never exist. Even in a small commercial scale, you wouldn’t buy a product that you don’t trust at all. In big financial aspects, who exactly will enroll themselves for a policy that entails huge financial requirements when the confidence is too low? Even if it’s not a financial institution, trust in cases like this is unimaginable. Thus, economy operates under a blanket of consumer confidence, and it now gets on how effective the marketing of the product or service line is.

Unlike goods, where consumers have different options upon purchase, i.e. choosing cheaper over quality, or quantity over popular, services is more into customers choosing the reliable ones. This indeed is one of the natural reflexes of humans to money. In goods, the minimum you would spend could go to as low as a dollar or less, while in services, the lowest is at least 80 dollars a month and it grows as time flies. Since it involves larger chunks of money, we tend to seek for the reliable service providers so as not to waste the hard-earned money. And this is not really a new issue for these financial services institution.

Confidence rating is an essential part in the economic positioning of financial service providers like insurance. This is part of their core management starting from the time that services became part of the trade industry. It’s the parameter with the biggest effect for most of the financial giants today. But everyone know that each road has its ups and downs. Unfortunately though, in the case of finance industry for the recent years, such trust is at its all-time low.

According to a survey conducted by Edelman as released in their yearly Trust Barometer, technology, automotive and foods & beverages rank as the top 3 institutions trusted by people according to market surveys. They earned trust ratings of 77%, 69%, and 66% from their customers, respectively. Now, how about the financial services? Based on the survey, the financial services is gaining the trust of about 50% or less of their customers, which means half or more of their customers aren’t confident with their services at all. The question is, why is the figure this low?

There are several reasons why trust in the financial service is declining. But the center of it all lies on the ethical issues embedded in this industry. The public seems to have the perception that the financial services sector is more unethical than other areas of businesses. This misconception persists for several reasons as what James A. Mitchell, an executive fellow-leadership at the Center for Ethical Business Cultures in University of St. Thomas College has stressed.

First, the industry itself is composed of a very large ecosystem. It encompasses banks, security firms, insurance companies, mutual fund organizations, investment banks, pension funds, mortgage lenders and any company having a business in financial field. With that being said, it’s no wonder that the industry will always have a place in headlines touting its ethical lapses.

This company is composed of trillion dollars and is constantly growing at 8 percent a year which is more than twice as fast as the gross domestic product. It’s indeed highly profitable. And since this number is coupled with such money taken from its customers, there’s no wonder that our eyes are always pointing in scrutiny to them. As much as how this industry is highly regulated with high percentage of these bad transactions being identified and reported compared to other industries, the trust rating falls at large the moment it faces internal problems than others. This is the double standard on businesses that work solely on trust and money.

With that being said, what the public will see on the end of its judgment is how these companies failed to do their task so much so that they will barely appreciate the benefits they get because  they tend to have the mentality that goes like – “Of course they’ll do it ’cause it’s what we paid them for”. Bad publicity is a great deal nowadays especially during these times when social media and the internet can spread information and reach milestones in a matter of seconds.

Of course, we’re not saying that miss-selling of policies, fraudulent acts, underreserving, and other things of such kind that commonly cause a financial institution to bankruptcy are exceptions. In fact, they belong to the ethical issues and this is true to all companies. What we’re trying to imply is that more and more people continually undermine what these insurance policies have to offer. We live in a world that information spreads as fast as a lightning. But oftentimes, it is the same information being drawn at different perspective. What comes at the expense of information accessibility is people being more critical of their engagements most especially when it comes to finances. 

Another reason to this all-time low confidence is the recent scandals in the industry sector in response to the global financial crunch. The case of AIG and Goldman Sachs have trickled down perceptions that most private institutions don’t have back-up financial plans when bankruptcy already hits their cleaves. And this is particularly important in a company that promises return services in the future, when the needed already rises. Since the need is uncertain, the certainty that the promise will be fulfilled the moment the need arises also has to be secured.

The best way to solve such phenomenon is to re-establish the trust existing between the public and the industry. The industry must do its best to address such issues and the public must help the company by being knowledgeable themselves – asking questions to clarify what the policy is all about and should not rely on a single perspective. Well, these industries are only doing business but the business we’re talking about is serving the public. So let them do their part as we do ours too.

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