The thing about trust

Over a decade later, the financial services industry is still trying to earn back the trust of its consumers.
Trust is arguably the most important factor in any relationship. Picture: Shutterstock

This article was first published in the latest issue of the Moneyweb Investor. Click here to read the magazine in full, at no cost to your pocket.

Trust. It’s such a well-worn word. “I don’t trust you.” “Why should I trust you?” “You have to trust yourself before you can trust others.” We all know the words, have said the words or heard them said. Over-used the word may be, but that doesn’t take away from the fact that trust is a massive concept. Arguably it is the most important ingredient  in determining if our relationships will work or not.

Which is why market research companies spend so much time trying to determine whether the public trusts certain politicians or whether consumers trust certain brands. Without trust a politician’s career is dead in the water and a particular brand is destined to remain on the shelves.

The financial services industry was delivered a near-fatal blow post the great financial crisis. Whether one spoke of banking, investing, lending or insurance — it all seemed to project an aura of questionable trust.

Since then Ponzi schemes, forex trading scams, binary option traders, funeral assistance businesses that are not registered nor their benefits underwritten, the collapse of African Bank and globally the fake accounts scandal at Wells Fargo have delayed the full restoration of trust. To be fair some of these businesses are downright illicit, but consumers do not discriminate.

(Perhaps it’s worth noting at this point that consumers trust the media and government even less than they do the financial services industry.)

Thus, almost a decade later, the industry is still trying to earn back trust and the CFA Institute is trying to measure it. A recent survey commissioned by the institute, called The Next Generation of Trust: A Global Survey on the State of Investor Trust,supports this point.

The survey observes that overall trust levels among investors — institutional asset owners and retail — have risen since 2016. However with higher trust comes higher expectations, and among retail investors, the gap between what investors want and what the industry is delivering has widened.

For instance, more than half of retail investors believe that financial advisors fall short of meeting their expectations, particularly in the areas of fee disclosure, management of conflicts of interest and generating returns better than a
benchmark. If there is good news in this, it is that by sticking to the basics of professionalism – putting clients first, being transparent about fees and performance and demonstrating expertise – the financial services industry can – and is – regaining the trust of their clients.

It comes down to the old adage ‘people do business with people’. It seems to be common sense that people will appoint a financial advisor because they trust that individual to treat them fairly and do their best by them. However if the advisor under-performs, or fails to communicate or respond to client requests, then the relationship will break down as the trust is eroded.

What was interesting is that of the 3 500 retail investors surveyed – across all age groups – the majority prefer to get their advice from people, using technology as a tool for execution. But this may change. Almost half or those surveyed, 48%, say that in three years it will be more important for them to have technological tools to execute their own strategy rather than a person.

What this means is that the investment industry is competitive and is changing fast, but investor trust remains a foundational element for success. It’s a life lesson so simple I sometimes wonder why we have to relearn it.

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.



You must be signed in to comment.




The Budget Speech explained
Moneyweb’s 2020 national budget offering, including infographics and audio ratings, as well as past budget coverage....

The Investor Issue 48
Separating out the noise from useful information in the markets is not easy. The trick to staying the course is to keep an eye on ...

The Investor Issue 47
Some people intuitively understand that investing for future gain is a long-term process that cannot be rushed. The management of ...

The Investor Issue 46
While US innovation soars and its tech listings continue at a ferocious pace, SA has no real plan for how to embrace the 4th Indus...

The Investor Issue 45
As the investment world falls more and more in love with the simplicity that ETF investing offers, index providers are realising t...

The Investor Issue 44
Company financial statements are the last line of defence for investors wanting to protect their investments. But these cannot alw...

The Investor Issue 43
What makes one CEO great and another mediocre? The Moneyweb Investor ponders this and other leadership questions in the latest iss...

The Investor Issue 42
Stagnant economic growth and questionable economic policy is hampering the development of mid-sized - and investible - businesses ...

The Investor Issue 41
If you are one of those people who invests more energy into your credit card or medical aid rewards programme than you do your ret...

The Investor Issue 40
Volatility in global markets is higher than it has been in years, giving investors the jitters. Some 'experts' are suggesting a re...

The Investor Issue 39
From lessons from Buffet to building your own crypto-portfolio (a risky endeavour by anyone's standards), this issue of The Moneyw...

The Investor Issue 38
They say the art of investing is to ignore the short-term noise and focus on attaining long-term goals. That's true, but that does...

The Investor Issue 37
Getting the economy on the correct footing requires that everyone pulls their weight. Our writers this month have gone above and b...

The Investor Issue 36
The past year is littered with train wrecks like Steinhoff, SAA and Eskom. But there is real sense of ‘back to business’ in So...

The Investor Issue 35
Stock markets are soaring, but productivity is not. Innovation continues, but leads to fewer new jobs. And the great and the good ...

The Investor Issue 34
South Africans are fed up with corruption, or anything that has even a whiff thereof, as JSE rockstar Naspers is currently experie...

The Investor Issue 33
As the year races towards its close, investors will be forgiven for feeling a little breathless. The British WWII propaganda phras...

The Investor Issue 32
Anyone would think that getting an economy moving is rocket science. It's actually not. It requires single-minded commitment. Whil...

The Investor Issue 31
We examine the opportunities of forex trading, the best unit trusts, e-commerce at Richemont and more. ...

The Investor Issue 30
Despite what the astrologers say, there are no shortcuts when it comes to successful stock picking. Fundamental analysis counts. T...


Follow us:

Search Articles: Advanced Search
Click a Company: