Fund managers, which played little or no role in the financial crisis, appear to be the least trusted of all financial services firms, according to PwC’s latest report.
The report, How financial services lost its mojo – and how to regain it, is based on analysis of a survey of over 2,000 people across the UK.
Mark Pugh, UK asset management leader at PwC, says: “Lack of trust and hence engagement is an increasing concern and risk for the asset and fund management industry, especially in the changed world they find themselves.
“The need for asset managers to engage directly with their customers and to raise the level of understanding in the relevance of their products is essential if the asset and fund management industry is to have the continued relevance and importance in the 21st century as it has held in the past.”
The report also reveals that although almost one in two people (49 per cent) believe regulation of the financial services sector has been strengthened in the wake of the crisis, a greater proportion (57 per cent) do not believe the reforms that have been implemented are sufficient to ensure that history will not repeat itself.
The survey suggests that consumers’ lack of trust is affecting all financial services sectors, not just banking, reflecting a generalised malaise across the industry. Fewer than one in three consumers now trust their bank, while for other types of financial services company, ratings are even lower. The fact that certain types of institution have been at the forefront of industry issues in recent years has not prevented other organisations, such as fund managers, from suffering reputational damage.
The survey suggests that consumers’ personal experience with financial advisers is generally the most significant factor in determining the level of trust. Press coverage was cited as the most significant influence on people’s trust in fund managers.
The asset management industry’s traditional response to concern about consumer mistrust has been to stress goals such as greater transparency. However, the survey suggests the impact of further work of this type might be relatively limited, at least in isolation. Though greater transparency is the single improvement most likely to rebuild consumer trust in financial services, even here fewer than one in two people (46 per cent) would be impressed by such changes.
Pugh says: “The lack of trust in fund managers and financial advisers partly reflects a failure of providers to articulate the value they are offering. Providers must find new ways to explain the services they are providing, encourage consumers to voice their goals, priorities and expectations, and to respond to these.
“Taking genuine and transparent steps to satisfy customer goals, priorities and expectations, especially where there is no obvious short term gain – or even a clear cost – to the provider, is a response we’re starting to see more of.”
Digital commerce is a growing phenomenon – to which financial services are well suited – and this is likely to be a key battleground going forward both between incumbents and also for challengers. People consistently rate financial services companies ahead of businesses such as retailers on their data practices. However, the data suggests that investment providers and financial advisers are lagging behind other financial services providers. Data security is an increasingly important issue for consumers and no one financial services brand has dominated this opportunity. This could mean that asset and fund managers could innovate and lead the industry by developing more relevant and engaging digital data protection services for consumers in an area where the financial services industry retains relatively higher levels of trust.