NEW YORK: Financial services companies have lost hundreds of millions of dollars in the past year due to reputational issues, according to a survey released Wednesday by Makovsky.
The Wall Street Reputation Survey, conducted by Echo Research, examined the state of the financial industry's reputation. It is based on 150 interviews with communications, investor relations, and marketing managers and executives at a range of financial firms, including banks, brokers, asset management firms, insurance and real estate companies, venture capital firms, and credit unions.
It found that despite an improving economy and record stock-market highs, 44% of financial services companies lost 5% or more business in the past 12 months due to poor reputation and customer services. This lost business totaled hundreds of millions of dollars, according to the study.
Although five years have passed since the peak of the financial meltdown, six in 10 marcomms executives in charge of restoring and building brands at financial companies say it could take another five years to restore their reputations to pre-crisis levels.
More than half of financial services experts surveyed said their company's communications and marketing programs has been “somewhat effective” in changing external and internal perceptions.
Meanwhile, 18% said their programs have been “very effective” in improving perception.
Nearly two-thirds of respondents (61%) say a negative public perception of the financial services industry is ruining their company's reputation, while more than half (52%) said their firm's crisis management is a negative factor weighing down their reputation.
Scott Tangney, EVP at Makovsky, said the bad reputations among financial services companies are “contagious.”
“The problem is that the public has put the whole industry into one basket, and it is a bad basket. Companies are hitting a wall, and they need a better roadmap to differentiate themselves,” he said.
Tangney said that every time the federal government takes action against a financial services company, such as issuing a fine, the whole industry's reputation takes a hit.
An example is when HSBC was ordered to pay $1.92 billion to the US Justice Department last December after it failed to prevent money laundering.
“There also has to be a concerted effort from the financial services companies to rebuild the entire reputation of the industry,” he said.
Respondents named customer satisfaction (82%), financial performance or shareholder value (71%), and strong brand (69%) as the most important factors affecting corporate reputation at their company.
Financial services marketing and communications executives said investor relations (93%) and corporate advertising (92%) are the most impactful activities they have implemented to address negative perceptions with external audiences.
Sixteen percent said social media had no benefit in improving reputation.
Nearly three in four (73%) financial services marketing and communications executives feel it is “very” or “somewhat” important to measure the impact of a reputation-building program among stakeholders. The study found that about one-third (36%) of these companies conducted one in the past 12 months.
“We have a lot of work to do in helping financial services companies get back on track,” said Tangney, who added that a major challenge faced by marcomms executives is getting management to invest in reputation building. “They are really finding headwinds internally in getting the support and buy-in they need from senior management to go out and rebuild the reputation of their company.”