“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” — Warren Buffett
In the case of PricewaterhouseCoopers LLP, 83-years of reputation-building took a serious hit when a representative from the firm mixed up the envelopes for best picture on Oscar night.
You might say, yeah, but the Academy Awards are a celebration of people who create make-believe worlds.
And I would say, why would I entrust someone with my taxes in the privacy of their offices when they can’t get something right when 38 million people are watching?
The (dis)trust factor
I am not here to cast stones against PwC. People make mistakes. I get it. But this gives people another reason to distrust the financial services industry.
Let’s face it, advisors don’t need another hit. They need to build trust, not tear it down. And don’t be naive enough to think that when PwC screws up on national television, it only makes PwC look bad.
Sure, they take the biggest hit, and rightly so. Their Oscar flub suggests, rightly or wrongly, that PwC can’t be trusted with valuable information. But it doesn’t stop there. It also plants a seed that financial firms, and financial representatives, can’t be trusted either.
Can you trust me now?
Paul Marcarelli, the bespectacled former Verizon pitchman used to ask infinitum, can you hear me now? Paul, as you might know, now pitches the wares of Verizon’s competitor, Sprint. I realize he’s an actor, but really, are we supposed to trust him now?
What’s next? Is Flo, from the Progressive commercials now going to jump ship and pitch Allstate or Geico?
While I’m making light of Paul Marcarelli’s turncoat ways, trust is a serious issue in our society, an issue that deserves closer scrutiny if we’re going to solve it.
Financial services isn’t the only industry under the microscope. (Photo: iStock)
Media is another industry that’s the object of constant scorn, often for good reason.
When I was growing up in the ‘70s, “fake news” was the domain of The National Enquirer and others of its ilk. When I ventured to the local pharmacy once a month to buy Spiderman and Captain America comic books, I often wound up hypnotized by the outrageous headlines from the tabloid mags: “Bigfoot Kept Lumberjack as Love Slave”; “News Reporter Eaten Alive by 80-FT Dinosaur!”; “Christmas Miracle! Severed Leg Hops to Hospital!”
Now fake news has gone mainstream. Supposedly, CNN and The New York Times are among the news outlets that create fake news. In a February 17 post on Twitter, President Trump tweeted, “The FAKE NEWS media (failing @nytimes, @NBCNews, @ABC, @CBS, @CNN) is not my enemy, it is the enemy of the American People!”
Fake news has gotten Facebook in hot water. Fake news entered the presidential election. Fake news causes doubt.
Unlike the financial services industry, where rules apply and designations and licenses must be earned, anyone with a smartphone or a keyboard can become a news outlet, even if they’re living and posting form their mom’s basement.
With so much uncertainty in place, people are left to ask, who can I trust? For some, nobody. A persistent distrust of government bodies, financial institutions and the media, furthers the distance between those entities and the public.
As bad as all that sounds, it’s not undoable. We can regain the public’s trust. It will just take effort and time as we see in the following studies.
Boomers are skeptical of financial services professionals in the wake of the Great Recession. (Photo: iStock)
A fascinating study by the Bankers Life Center for a Secure Retirement, examined the mindset of middle-income baby boomers and how they are recovering from the Great Recession. Many have lost faith in the system. They were diligent about saving for retirement, then their nest eggs took a beating when the markets crashed.
“Ten years ago, baby boomers had a clear vision of what a personally satisfying retirement looked like,” says Scott Goldberg, president of Bankers Life. “But today, many are realizing they will not be as financially independent in retirement as they once expected.”
Today, only two percent of middle-income boomers believe the economy has fully recovered. On a personal level, 65 percent don’t believe they have seen any personal benefit from whatever recovery has taken place.
In other words, the majority no longer trust the process or the institutions. Those processes and institutions lost people their money in 2008 so why should they not believe it will happen again?
The long road back
It’s been a long road back to gaining the public’s trust from the 2008 financial crisis, but the industry is making progress.
“In 2012, trust in financial services was at 43 percent on a global basis,” according to the 2016 Edelman Trust Barometer. “In 2016, global trust in this industry is at 51 percent – an 8-point increase over this five-year period, the most of any industry.”
Before we get too excited by the data, the financial services industry had the longest hill to climb, and is the least trusted industry that Edelman surveys. Other industries in their State of Trust project include: energy, employee engagement and the healthcare sector.
“Trust is too fragile, and today’s financial services climate is too unpredictable for companies to rest on their laurels,” according to Edelman. “The industry needs to continue to be dynamic and double-down on trust-building solutions.”
The Edelman survey found that trust matters in a company’s bottom line. When consumers trust a company they are more willing to:
- Choose to buy that company’s products and services.
- Recommend them to a friend or colleague.
- Share positive opinions online.
- Defend the company.
- Pay more for the prodcuts.
- Buy shares in the company.
Are you consistently making trust and transparency part of your everyday interactions with clients? (Photo: iStock)
The CFA Institute partnered with Edelman for a 2016 study and found that in this world of increasing volatility and unpredictability, transparency is a great way to gain trust.
“Investors simply want better information today, and transparency and consistent communication are more important that ever in the client relationship,” according to the study. “By transparency, investors mean clear, forthright communication: regular, clear communication about fees; upfront conversations about conflicts of interest; and easy-to-understand investment reports.”
Trust as habit
As you think about making trust a part of your everyday interactions with clients, take a look at the definition of the word. From dictionary.com, “trust” has seven definitions. Here are a few that resonated with me: 1) “reliance on the integrity, strength, ability, surety, of a person or a thing;” 2) “confidence in the certainty of future payment for property or goods received;” 3) “the obligation or responsibility imposed on a person in whom confidence or authority is placed.”
As you communicate with clients in person or through technology, take a look at some of the more powerful words from those definitions — reliance, integrity, confidence, obligation, responsibility.
It’s one thing to read them and to say them, but something else to put them into action; they need to become habit, something that you think about and work on daily.
Earlier this week, Accufund released an ebook, “The Trust Factor and NonProfit Financial Management.” While the book specifically discusses trust within nonprofit organizations, many of the principles translate well to frontline financial professionals.
As Peter Stam, president of Accufund says, “Trust is not something you can think about every few months or once a year. It’s central to an organization’s success and needs constant nurturing. There is a direct correlation between the trust factor and your level of transparency and accountability. If you have proper systems, procedures and technologies in place, it can help improve trust.”
Stam adds, “Now, more than ever, clients are most critical of the organizations they choose to support. If they deem your organization lacking in the trust factor, they will go elsewhere.”
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