Financial Services Industry Ranks Dead Last in Consumer Trust: CFA, Edelman

Only half of investors trust firms to do what’s right

When investors think of financial services, many of them think of this guy. When investors think of financial services, many of them think of this guy.

Half empty or half full, either way it’s low.

The CFA Institute/Edelman Investor Trust Study 2013 found only half (53%) of investors trust investment management firms to do what is right. That compares with 68% of Hong Kong investors and 39% of UK investors.

Retail investors in the United States are also less trusting of the industry than their institutional counterparts (51% vs. 61%, respectively).

More troubling is the fact that financial services is the industry least trusted by the general population, coming in behind telecommunications (56%), automotive (57%) and pharmaceuticals (60%), among others.

The reasons are familiar.

“This limited amount of trust reflects a lack of confidence in the broader financial services industry,” the report says. “Hit by the shock of the 2008 financial crisis and ongoing scandals around money laundering, rogue trading, rate manipulation and insider trading, the industry lost the faith of its key constituents — the clients, investing public, and other participants that help it function on a day-to-day basis.”

But not all is lost. Interestingly, the study notes that despite investors’ lack of trust in the investment industry, they remain confident in the capital markets. Nearly three in four investors say they are optimistic about their fair opportunity for profit or loss in capital markets. And this is true worldwide: 74% of investors in Hong Kong, 70% of investors in the United States, and 69% of those in the United Kingdom express that belief.

“On the surface, these numbers are high," the report says. "But intensity is low — just 19% of investors ‘strongly agree’ they have a fair opportunity to profit by investing in capital markets.”

Calling the low intensity a “warning sign,” the authors note the amount of distrust in the investment management and, more broadly, the financial services industries could be infecting the capital markets.

“If this continues," they conclude, "it could damage the markets’ role as an essential component of economic vitality.”

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