NEW YORK: Almost half of individual investors said they trusted financial services companies less in 2010 than the previous year, according to Edelman's second annual Trust in US Financial Services study.
Of the 46% that reported declining trust in the study, 57% said financial services were "acting in a greedy manner." Meanwhile, 18% said the "industry itself has made the problems worse."
In a breakdown of financial institutions by type, 67% of individual investor respondents said they trust community and regional banks to do what is right, followed by mutual fund companies at 55%, financial institutions in general at 49%, large national banks at 45%, brokerage firms at 43%, life insurance companies at 42%, property/casualty insurance companies at 37%, investment banks at 35%, and private equity firms at 32%.
The study also found that half of individual investors need help managing their money, but six in 10 are uncertain of the value of large financial services companies.
Individual investors rated honest communication (91%), and open and transparent business practices (84%) as important factors for overall reputation of a financial company. Social networking connections was the least rated by respondents at 5%.
"The fact that the individual investors surveyed ranked 'honest communication' and 'open and transparent business practices' as higher factors to a company's overall reputation then traditional marketing tactics such as 'fair and competitive prices' and 'website with easy financial transactions,' is something that agency executives should really take note of," said Julie Crothers, SVP of financial communications and IR at Edelman.
Nearly 40% of respondents said brokers, advisers, and bankers are seen as the most credible sources of financial information. The CEO or other senior executives of a financial company were seen as 5% credible for information.
Six of 10 individual investors, or 62%, said they use national news sources most regularly, followed by websites of financial services companies at 48%, local news sources at 36%, social media (Twitter, Facebook) at 4%, and none of the above at 14%.
"It's important for professionals in our industry to counsel clients to move beyond basic marketing tactics, which consumers see as 'tablestakes,' and help ensure they are communicating honestly and transparently," Crothers added.
Edelman surveyed 503 individual investors with an income of $50,000+ and investments of $10,000+ in liquid assets and/or mutual funds, stock and bonds, and more than just a 401(K) or Roth/traditional IRA.