Internationally, companies in the financial services sector were again the least trusted among industries, according to the latest annual Edelman Trust Barometer, which has been measuring trust in businesses, NGOs, governments and the media for the last 20 years.
In the past, the Edelman Trust Barometer asked respondents to answer a simple question: How much do you trust each institution to do what is right? However, the latest research went further, analysing respondents’ ratings of the competence and the ethics of each institution in more detail. The reason for the general lack of trust? None of the four entities measured is seen as both competent and ethical. Of the four institutions, only business is seen as competent, and only NGOs are viewed as ethical.
“People’s expectations of institutions have led us to evolve our model for measuring trust,” Richard Edelman, CEO of Edelman said. “Trust today is granted on two distinct attributes: competence (delivering on promises) and ethical behaviour (doing the right thing and working to improve society). It is no longer only a matter of what you do – it’s also how you do it.”
The research report highlights that trust is undeniably linked to doing what is right. After tracking 40 global companies, they have learned that ethical drivers such as integrity, dependability and purpose drive 76 percent of the trust capital of business, while competence accounts for only 24 percent. Ethics is therefore three times more important to company trust than competence.
Furthermore, the research indicates that consumers expect the brands they buy from to reflect their values and beliefs, employees want their jobs to give them a sense of purpose, and investors are increasingly focused on sustainability and other ethical commitments as a sign of a company’s long-term operational health and success.
Trust and ethics in the South African financial services industry
An interesting statistic is that although there was a 1 percent decline in trust in the financial services sector according to the 2020 Barometer, there was a 12% increase in the last eight years.
In a similar South African report last year, a survey released by The Ethics Institute found an increase in unethical behaviour at work. One of the outcomes of the survey was the calculation of an overall risk score. The overall corporate South African Ethical Culture Risk Score was 63 – a score that represents moderate risk and illustrates a developing ethical culture.
According to the survey, the industries with the highest ethical scores are the banking, investment, finance, insurance and medical services industries, scoring between 67 and 72.
The General Code of Conduct for Authorised Financial Services Providers and Representatives states that “A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.” Is it these regulatory requirements, accountability measures and our commitment to ethics that shows the industry is doing something right?
Treating customers fairly
TCF is the foundation on which the Twin Peaks approach to regulation is based, and ties in closely with the concepts of competence and sound moral principles. What may be a challenge for the industry is the requirement that you must demonstrate your commitment to TCF.
You may, by way of example, have a complaints resolution system in place that conforms to all the requirements, but if it does not deliver fair outcomes to clients, in the view of the regulator, you will be found wanting in terms of TCF.
In practical terms we have seen a large number of debarment decisions, even by large institutions with the necessary legal resources, referred back by the Financial Sector Tribunal for failing to follow a fair due process.
The future of the industry, and your own business, will be influenced by whether your clients regard you as worthy of their trust. This could be the most important reason for staying engaged with you, rather than reverting to technology.
Click here to download the 2020 Edelman Trust Barometer.
Click here to view the 2019 South African Business Ethics Survey.