The 2008 financial crisis continues to be felt by financial services firms and consumers, according to a new survey by Makovsky, a communications firm.
Ebiquity conducted an online poll of two groups for Makovsky in the spring: 228 executives responsible for the management and supervision of communications, marketing and investors relations for their financial services company of 500 or more employees, and a random sample of 1,079 adults representing the general U.S. population.
Eighty-six percent of financial services communications professionals in Makovsky’s “2016 Wall Street Reputation Study,” released Tuesday, said the perception of their firm was still being affected by the financial crisis.
“The data makes clear that the financial crisis remains the prism through which Wall Street is viewed and judged,” Makovsky Executive Vice President Doug Hesney said in a statement.
He added, “The collapse of Lehman, and all that came afterwards, casts a long shadow over the reputation of the entire financial industry. Despite some headway, it is clear that these institutions must continue to persistently address reputational issues.”
The annual Makovsky study found U.S. consumers were also still feeling the effects of the 2008 crisis and resulting recession. Thirty-three percent of consumers in the survey said they were unable to save as a result of the crisis, and instead were living paycheck to paycheck, up from 29% in the 2015 poll. A third said they’ve had to significantly cut back spending, up from 26% in 2015. And 91% remained concerned about the possibility of a future crisis.
Risks to Reputation
The financial services sector cannot help but be concerned that more U.S. consumers are finding it hard to trust financial institutions again. Twenty-seven percent of consumers surveyed said they had lost trust in the financial services industry, particularly with regard to personal data, a five percentage point increase from 2015.
Eighty-six percent of respondents said the unauthorized access of their personal and financial information would likely cause them to switch to an alternative financial service provider, well up from 73% who said this in 2015. And while more than a third of consumers identified a failure to protect personal and financial information as the biggest threat to a financial services firm’s reputation, data security was not the only cause of continued tension in the relationships between financial institutions and customers.
Seventy-eight percent of consumers reported that even negative news about their current financial institution—such as regulatory issues, illegal activity or fines—would likely prompt them switch providers. A similar percentage said they would go to another provider that offered lower costs or fees, and more than half would go to a firm with advanced mobile technology.
When addressing consumers’ concerns, financial services professionals in the study focused more on their individual firms than on trust in the industry as a whole. Twenty-one percent said differentiating their firm from bad players in the industry was the greatest reputational challenge they must address this year. Just 13% identified rebuilding trust in the overall financial system as the greatest reputational challenge to address.
Makovsky said financial services professionals’ belief that restoration of the industry’s reputation was a long way off may in part explain this focus on differentiation. The survey found a majority of professionals believed it would take an average of two more years to restore their firm’s reputation to pre-financial crisis levels, while about a third expected it to take between two and five years.
“With all the uncertainty over future regulations and changes that may be coming to the industry, it’s likely that institutions will focus on differentiating themselves through improvements to customer service and protection issues,” Hesney said.
Seventy-four percent of financial services professionals said customer satisfaction was the most important issue influencing corporate reputation this year, outpacing the 69% who identified strong brand, 66% who said reputation management and restoration and 66% who identified judgment and transparency in handling a crisis.
In fact, 61% of respondents said improving customer service was very important to strengthening their company’s reputation over the next year. Makovsky said this may explain why more than half of firms surveyed had conducted research into the effect of their reputation-building programs among over the past year.
Besides differentiating themselves from traditional competitors through customer service, more than three-quarters of communication professionals were worried about losing customers to alternative financial services providers such as Apple, Google and Amazon—which Makovsky said is a valid concern based on consumers’ survey responses. Although most consumers still preferred to trust traditional financial institutions with their personal information and privacy, 33% of respondents saw online banking accounts and 30% digital wallets as trustworthy alternatives to traditional banking solutions.
“When it comes to repairing trust with customers, financial services firms would do well to communicate consistently and clearly about cybersecurity and personal data concerns,” Hesney said. “This could not only differentiate these firms from companies who have mishandled data breached, but provide a competitive edge against the rise of alternative fintech providers.”
A recent report by the Financial Planning Association showed cybersecurity was a top priority for most financial advisors, but many advisors did not clearly understand the risks or how to neutralize them.
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