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 business, NGOs, government and the media for the last 19 years. The online survey showed that globally, financial services only achieved a two-point increase over 2017. In the survey respondents are asked to indicate how much they trust businesses in a variety of sectors to do what is right.
What decreases trust?
Globally, the top five factors influencing trust in financial services are:
- Lack or absence of product and cost transparency
- Confusing products and services
- Unsolicited selling
- Reluctance in addressing problems
What increases trust globally?
The top five factors are:
- Easily understood terms and conditions
- Reliable fraud protection
- Easy access to product and service information
- Convenience in doing business
- Access to real people
What about the SA financial services industry?
A nationwide study by the Financial Planning Institute of South Africa a few years ago showed that 70% of South Africans indicated that they don’t know whom to trust when it comes to financial planning. Globally researchers are therefore flagging trust as a huge concern.
The General Code of Conduct for Authorised Financial Services Providers and Representatives clearly 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.”
Conducting your business with integrity and acting in the best interests of your clients should not only be your point of departure – your clients should experience it as such.
The six Treating Customers Fairly outcomes further stress the following:
- Customers must be confident they are dealing with firms where TCF is central to the corporate culture
- Products & services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly
- Customers are provided with clear information and kept appropriately informed before, during and after point of sale
- Where advice is given, it is suitable and takes account of customer circumstance
- Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect
- Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.
Why then, despite all the financial services regulation, is the industry still the least trusted in the economy?
A number of factors, or a combination of it, may be responsible for this, as witnessed in Australia recently – the state of the economy, the rise of technology, the increase in fake news, customer service and industry scandals.
Will the proposed Conduct of Financial Institutions (COFI) Bill be able to drive an increase in trust in the industry?
No amount of legislation or regulatory intervention can ensure fair treatment of clients. At the recent public workshop to introduce the COFI Bill, the following introductory comment succinctly identified why the FAIS Act did not achieve what it set out to do:
The number of different financial sector laws causes fragmentation in regulatory requirements, regulatory arbitrage, a silo approach to regulation, and a compliance-focused, tick-box regulatory focus. This has contributed to persistent poor customer outcomes in the financial sector, in some instances even while the letter of the law is followed.
There is a further issue which is not currently being addressed under proposed new legislation:
Until the balance between the interests of policyholders and those of shareholders are restored, we are, in the words of the Minister of finance, pouring water into a sieve.
Until this happens, we will possibly repeat, year after year, the iconic words of Marelize’s mother when it comes to trust in the industry.
Click here to download the executive summary of the Edelman Trust Barometer.