More On Legal & Compliancefrom The Advisor's Professional Library
- U.S. Securities and Exchange Commission Information This information sheet contains general information about certain provisions of the Investment Advisers Act of 1940 and selected rules under the Advisers Act. It also provides information about the resources available from the SEC to help advisors understand and comply with these laws and rules.
- Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.
Who thinks Wall Street has a reputation problem and that increased regulation is needed to restore trust in the financial services industry? Wall Street, that’s who.
Many surveys have established that Wall Street and Washington have been in ill repute in recent years, but the 2012 Makovsky Wall Street Reputation Study is unique in surveying not the masses but the executive suites.
“There are tons of surveys of the public,” says Scott Tangney (left), who works in Makovsky’s financial services industry practice. “We wanted to poll the people on the front lines—the people in charge of keeping the companies’ reputations.”
To that end, the New York-based consulting firm hired the research firm Echo to survey 150 marketing and communications executives at publicly traded and privately owned banks, investment companies, brokerage firms, mutual fund and ETF companies and the like.
The survey population consisted of senior-level executives—chief marketing officers, vice presidents, directors and managers at large and midsize firms. Within that survey population, the margin of error is plus or minus eight percentage points at a 95% confidence level, Tangney says.
Perhaps surprisingly, nearly all of them—96%—say financial services companies invited the public’s negative perceptions through their actions or inaction.
Tangney, who presented his survey’s findings to financial communications executives Tuesday at the New York Yacht Club, said—in a separate interview with AdvisorOne—that nearly two-thirds of those surveyed said their companies’ own management of the crisis had the biggest negative impact on Wall Street’s reputation over the past 12 months.
Indeed, a majority of respondents—57%—grade Wall Street’s public relations effort with a C, D or F.
“We’ve had a crisis of reputation that’s really a crisis of confidence that’s spilled over to retail investors,” Tangney says. “Markets are really volatile and investors are on the sidelines. They’re not comfortable with the market. The flash crash, MF Global blowing up—these are issues that are keeping the wound open.”
A key issue that Wall Street’s reputation managers fear is keeping wounds open is executive compensation—81% of respondents see it as a problem.
"Battles over executive pay will probably be [an issue] this proxy season,” Tangney says.
Another perhaps surprising finding is that 77% of survey respondents view employee communications as a key reputational “headwind” for the coming year.
“After Occupy Wall Street and the financial crisis, there was a lot of concern in the industry about recruiting. Also there was concern about employee reaction,” Tangney says.
“‘Should I be working for this company? Is this company doing good, providing for a social need?’ A lot of the communications effort was internal as well as external. [Financial services companies] need to communicate to their employees first because employees need to explain issues to their clients and correct the record.”
So for reasons both external and internal, 73% of respondents feel that marketing and communications efforts will grow in importance. Indeed, one senior marketing executive remarked in Tuesday’s panel discussion that marketing executives want to have a say even on matters such as pricing because of the reputational impact issues like that can have. Negative reaction to banks’ efforts to increase debit fees was cited as an example.
Another of the survey’s surprise findings was the extent to which regulation is actively desired by Wall Street’s communications executives.
“77% are counting on regulation to help them build their reputations and trust faster. They’re actually working with regulators to make sure they’re not going to drive the car off the road,” Tangney says.
The Makovsky executive adds regulation of Wall Street “is more of a collaborative thing whereas it is portrayed as an adversarial thing. Even Lloyd Blankfein was quoted as saying he’s fine with regulation, but how far to do you go until it impedes business operations?”
The survey respondents gave their highest marks to Wells Fargo for best corporate reputation among financial services companies. The company “stayed quiet, stuck to their knitting,” Tangney says.
Though panelists at Tuesday’s event warned of the danger of being too quiet. “A lot of companies go quiet. Where they see dramatic improvement in reputation is more when the company engages. Reaching out, talking about consumer concerns—that really makes a difference,” Tangney says.
The Makovsky executive concludes: “Leadership in financial services industry is in limbo. Building reputation and trust not only…improves customer satisfaction, but also helps to rebuild value from an investor point of view.”