Financial services is still the least trusted major industry in Australia, despite gaining ground for the last five years, from post-GFC lows. The insurance and advice sectors are faring particularly poorly.
“Over the last five years, the financial services industry has increased its levels of public trust; in fact, it has grown trust faster than any other type of institution. But it had further to grow, off a very low base from 10 years ago,” Edelman managing director Francesca Boase said. “In Australia, financial services is still the lowest-ranked business sector for public trust, while technology ranks highest.”
Her comments were based on the findings of the Edelman Trust Barometer, an annual global survey of 33,000 consumers that measures public trust across four main types of institutions: business, government, non-government organisations and the media. In 2017, the barometer showed an overall decline in public trust across all types of institutions.
Boase was speaking at the Banking and Finance Oath’s inaugural Banking and Finance Ethics Conference in Sydney on June 8, 2017, where she detailed the survey’s findings as they relate to the local financial services industry.
Bad numbers for nearly all local sectors
Among Australian respondents, trust in banks sat at 48 per cent, below the global average of 53 per cent. The survey also indicated 53 per cent of Australians do not believe financial market reforms are working.
Boase said this reflected that the general public “doesn’t see much happening” in response to scandals “like CommInsure”.
Australia had the second lowest level of trust in the insurance sector, behind only Ireland; only 36 per cent of local respondents said they trust insurance companies to do the right thing.
Trust in the local financial advisory and management sector came in at 40 per cent, 10 percentage points lower than the global average.
The only part of the local financial services industry where trust improved on the previous year was the credit cards and payments sector, which enjoyed a bump of 2 percentage points, to 50 per cent.
Concerns about the ability of local institutions to manage security led the mobile payments sector to a score of 44 per cent on the trust barometer, compared with the global average of 59 per cent.
Australians cited international profit shifting, offshoring of jobs and exorbitant executive remuneration as the top three corporate practices that destroy their trust in institutions.
Boase said one of the most interesting findings for the financial services industry was that, for the first time, Australians said they were more likely to trust an employee of an organisation than its chief executive.
A wake-up call
Simon McKeon, who chairs the Banking and Finance Oath’s policy council, said anyone in the industry who was not disturbed by public attitudes the barometer revealed “has rocks in their head”.
He described the low levels of public trust in banking and finance institutions as a “millstone around [the] neck” of the industry that would make it impossible to achieve desired levels of long-term profitability for shareholders.
McKeon, a former chair of AMP, also said executives in the industry need to be more prepared to listen to how outsiders perceive them.
“The new chief executive of the Australian Bankers’ Association, Anna Bligh, summed it up so succinctly recently when she said that our industry was ‘experiencing an implosion of trust and an explosion of scrutiny’,” McKeon said. “A few of you might say she’s exaggerating…but she’s an outsider who’s come into this industry and that’s her honest appraisal of what she sees.”
The Banking and Finance Oath is an initiative unique to Australia and McKeon noted people in many international jurisdictions are watching its progress with interest.