Consumer trust in the UK’s finance institutions is struggling to recover in the wake of the financial crisis, with banks the least trusted of all, a new study has revealed.
According to a major report by academics at The University of Nottingham, a significant number of customers have faith in their financial providers only because they feel they have no choice. Some organisations are also effectively surviving on their reputations amid a lack of consumer trust in the people who run them, says the research.
The findings emerged in the latest Trust Index from the influential Financial Services Research Forum, based at Nottingham University Business School.
The study drew on data collected by YouGov from the responses of more than 2,000 consumers who were questioned in an online survey. Institutions received index scores out of 100, with those above 50 indicating increasing trust, those below 50 reflecting increasing lack of trust and 50 neutral.
Asked how strongly they trusted their own financial providers, respondents ranked brokers/advisers comfortably in first place. Yet even this figure fell significantly over the course of a year — from above 75 in the final quarter of 2009 to below 65 in the third quarter of 2010.
Banks, building societies, general insurance companies, life insurance companies, investment companies and credit card companies fared even worse. None of them came close to the score for brokers/advisers, with banks bringing up the rear and struggling to rise above 55 throughout the 12 months.
For the industry as a whole, brokers/advisers again generally earned the best ratings — though they finished the survey year slightly behind building societies.
The banking sector dropped to an index of 35 and was once again in last place. The only sectors to score above 50 by the end of the third quarter of 2010 were brokers/advisers and building societies. Forum director Professor Nigel Waite said the report highlighted the scale of the challenge the industry faces if it is to win public trust in the aftermath of the crisis.
He said: “The overall conclusion has to be that consumers are moderately trusting of their own financial institutions but tend not to trust financial institutions in general. As has usually been the case since we first developed the Trust Index in 2003, the brokers/advisers category continues to stand out as the most trusted.
“This perhaps reflects that consumers recognise the greater and more explicit responsibility such institutions have to work in their clients’ best interests. That said, in the current round of data collection even brokers/advisers have earned lower scores. This shows there is work to be done in every category.”
Additional questioning allowed researchers to identify potential explanations behind respondents’ attitudes towards trusting financial institutions. For instance, many gave far lower ratings to senior managers than to the institutions themselves — suggesting institutional reputation is crucial to retaining custom.
In addition, a ‘significant’ number of those surveyed felt that, having placed business with them, they had no option but to trust their financial providers.
Research author Christine Ennew, Professor of Marketing at Nottingham University Business School, said: “There is clear evidence of ‘forced trust’ for many consumers. They feel that, because it is essential to have bank accounts and many other financial products, they have no choice but to trust these institutions.
“But an equally significant number of consumers experience ‘active trust’ based on good reasons, including past experience. So there are two distinct camps.”
The industry can at least take comfort from a finding that it is generally more trusted than supermarkets and mobile phone providers — but not the NHS or the BBC.
The Forum is an independent, not-for-profit organisation that has been hosted by Nottingham University Business School for more than a decade. It is supported by government departments, regulators, charities and consumer bodies, as well as leading financial services providers.
The aim is to bring together all UK financial services stakeholder groups to inform policymakers in the public, private and voluntary sectors.
Professor Waite said: “The power of our research is that it allows individual providers to pinpoint customer perceptions that demand specific action. We would urge product providers to work with us in determining how well they are performing and where change is needed.”
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Notes to editors:
The aim of the Financial Services Research Forum is to inform policymakers in the public, private and voluntary sectors on matters concerning financial behaviour. The Forum is unique in bringing together all stakeholder groups comprising financial services in the UK for this purpose.
With some 60 supporting organisations — including government departments, the FSA, the Financial Ombudsman Service, leading banks, building societies, insurance companies and credit, finance and investment organisations, as well as consumer groups and charities — the Forum can justifiably claim to be the country's most inclusive body for furthering the understanding of financial behaviour.
The Forum is an independent, not-for-profit body that has been hosted by Nottingham University Business School for more than a decade. Its unique form of collaboration between the academic research community and practitioner groups in the public, private and voluntary sectors has earned it an enviable reputation in the UK and abroad.
The Forum provides a wide range of facilities, including seminars, primary research projects, secondary-based studies and position papers, as well as access to its global knowledge networks and contacts.
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The University is committed to providing a truly international education for its 39,000 students, producing world-leading research and benefiting the communities around its campuses in the UK and Asia.
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