Rebuilding relationships of trust in financial services
The topic of “trust” is important in today’s financial services industry, where the likes of Woodford, the PPI scandal, FCA financial penalties don’t paint a pretty picture of the industry.
Companies and individuals have been talking about trust and its importance for years. Just last week the Financial Services Forum (FSC) held a debate in our London office on the topic of whether financial services firms had managed to rebuild trust since the financial crash.
People always talk about trust but there is only a vague impression of what the term actually means.
We know that trust is an important component of organisations in financial services for a wide range of reasons – from managing stakeholders to selling products. And yet, in financial services we have not properly defined ‘trust’ nor discussed its value and implications.
The diverse financial services industry needs to set its own definition of the concept. Of course, this is a contextual process; for a bank, a definition of trust may be different to that of a private equity firm. A strategic approach to rebuilding trust is addressing “what is trust?” and ensure it is answered across the industry.
Absence of trust
Even without a clear definition of ‘trust’ it is abundantly clear when it is not there.
Around the time of the financial crash there was a global failure of firms to maintain a relationship with their consumers.
At its core, ‘trust’ is social and relational. In 2008 The New York Times summed up the lack of trust that was caused by the financial crash, by using a relationship anecdote: “Bankers now look at long-time customers and think of that old refrain from a failed marriage: I feel like I don’t even know you”. The distance between financial service companies and customer became disparate, long-term marriages were broken.
And today, the key examples of where trust is failing is a repeat of the breakdown of company-customer relationships. Woodford was perceived to have let down hundreds of thousands of pensioners and small investors last year and yet still majorly profited.
The notorious saying, ‘banks care more about money than their customers’, is still one that haunts the financial sector. For decades, what the media defined as “fat cats” in the financial world were seen as the lowest moral standard bearers.
Scandals shake the whole industry’s relationship with their customers, however, there are also many examples of how it is possible to build trust in an industry where individuals can give the sector a bad name in the headlines.
The basis of trust
A basic definition of ‘trust’ is an individual’s willingness to make themself vulnerable to another based on a judgment of similarity of aims or values.
As such, trust is a relationship that can be ‘built’. In a post-crisis world, trust has had to be built with the consumer in mind – engaging, delivering and communicating to build up a relationship of ‘trust’ ought to be at the core of business strategy.
While further compliance, regulation, governance and transparency have been the approaches to rebuilding trust in financial companies, what we mustn’t forget is that most firms are serving the most powerful element of our financial system: the consumer.
And this is where communication plays the key role; yes, the consumer must take centre stage, but we must have the best advocates for our sector leveraging their skills on social media and traditional channels to tell the story.
Without a clear narrative delivered to the public, providers will never be able to explain the services they are providing, educate their customers and encourage them to voice their goals, priorities and expectations to them.
There are a range of ways firms can build their customer relationship and no doubt there are more exciting avenues to be discovered in this space.
Bold gestures go a long way such as Larry Fink’s annual letter, which demonstrated a desire to stay in touch with the public and build new relationships with unconventional audiences. It showed that even established brands could take radical action to get with the times and build trust upon matters that they care about.
Honesty is also important – take RBS as a key example. As a firm heavily implicated in the financial crash it is now rebuilding relationships and has one of the highest levels of cash reserves in the industry. RBS’ previous boss admitted to the BBC in October 2018 that “We were not there supporting customers in the way we should have been” and “I think it will take five – maybe even 10 – years to rebuild trust to where we’d want it to be” . Honesty and a slow rebuild of trust is the only way they could re-emerge successfully after the crash shows a shift in corporate strategy.
Overall, to continue building trust in today’s society, new strategies are required but they all start with a fundamental understanding of what ‘trust’ means and what it specifically means to their company.
Various trust barometers have been published such as the FCA Enforcement Annual Performance Report which shows that financial services still have some way to go to build up ‘trust’. If the financial services want to pass the trust test, they need to be brave in building relationships with different stakeholders – now – regulators, government, consumers.