Want to build trust in financial services? Learn to navigate blind spots

Though wealth in the U.S. has significantly increased in recent years, institutions continue to grapple with a trust shortage.

Research from the American College Cary M. Maguire Center for Ethics in Financial Services offers good and bad news. Through consumer surveys and focus groups, on the one hand, and interviews with financial company leaders and consumer advocacy group leaders  executives, on the other, we developed a 360-degree view on trust, uncovering what it really means to prioritize a stakeholder-based approach.

First, the good news. The Maguire Center’s Trust in Financial Services research shows that the financial services industry scores in the middle of the pack among other service-related organizations, performing higher than government, media, and telecommunication services, though lower than healthcare and education. Unlike surveys ranking the industry as the least trusted business, when compared to other general business organizations, our findings suggest that financial firms’ trust status has room to improve but is not entirely negative.

However, the research also highlighted opportunity for trust-building when it comes in navigating the stakeholder culture – that is, understanding not only the minimum expectations of your stakeholders, but the belief systems, core needs, and values that drive them.

What’s “at stake” in financial services

Perspectives on what’s “at stake” in the financial system differ based on the role each stakeholder plays in the system. For example, while some stakeholders, including financial institutions, believe that financial success is the primary stake, those who view the financial system as central to numerous societal outcomes ascribe moral responsibilities to it, like advancing economic equality.

Trust is not a one-way dynamic. Nor are financial firms the only target of trust and distrust. Instead, trust runs low across multiple dimensions: between firms and customers, and across the other actors in the system (media; regulators; employees; etc.). Although financial institutions have prominent stakeholder status, their growth depends on the success of the entire ecosystem. Yet their reputation as greedy and self-interested actors limits their ability to build trust-based relationships.

The differing perspective of stakeholders reveals unique biases. Here’s a thought exercise. Take two stakeholders - one who stakes the financial relationship on "deservingness" (“Hard work pays off! If you want a loan, you should work to build your credit.”), and the other on "personal costs" (“It’s not fair to foreclose on people who can’t afford to pay.”). If these mindsets are engaged in a financial relationship, they may be working at cross purposes because they have different goals and priorities, possibly unbeknownst to each other. 

Since the two stakeholders are at greater risk of misunderstanding each other's motives and interests, they may lose an opportunity to build trust. Add to the mix the highly competitive and individualistic culture of the financial system, and these relational blind spots deplete critical trust potential. 

In our research, these biases showed up in stereotypical views held of each other in the system (e.g., "winner takes it all," "there are no shared interests in capitalism," and "they want our first born (about regulators)," etc.). Further compounding the complexity of the relationship, analysis of the mission statements of some of the stakeholders rendered that stakeholders aims are far-ranging, from economic growth to market stability, transparency, influence, professionalism and for some, ethics.

But if stakeholder views are so dramatically different, to close the trust gap, actors need to build genuine shared interest beyond the dollars and cents. This shift in perspective starts with each stakeholder understanding what the other believes is at stake.

Beyond expectations, meeting holistic customer needs

Senior executives shared with us that customer expectations have changed in recent years; the most frequently mentioned shift was the expectation that there be higher-quality relationships. Firms use various strategies to build trust, often focusing on the client/customer as a key stakeholder. One common approach is to periodically measure customer experiences and sentiments.

While addressing consumer expectations is an essential first step, to develop lasting trust-based relationships, institutions must tackle the intangibles that fuel the trust gap. Thus, firms should not merely focus on expectations, but customers’ underlying beliefs, needs and values – that is, to take a stakeholder culture approach.

To shed light on these cultural dynamics, we asked stakeholders about the power relations in the financial system, and found vast agreement that there is an inherent structural imbalance in financial relationships. Firms have more influence and power, while consumers are economically vulnerable.

Addressing stakeholder culture, in addition to expectations, offers a broader canvas for shared interest. Expanding the range of opportunities for shared interest is important to trust because it gives both parties in the relationship more entry points for mutual growth. Conversely, common practices in the financial industry such as one-sided contractual terms, or layered fees that are confusing to clients, emphasize the power difference in the relationship.

Meeting minimum expectations may increase customer satisfaction, but not necessarily trust. Education on strategies to navigate trust-based relationships can help uncover opportunities. Firms may be ignoring or discounting underlying beliefs, needs, and values, which significantly decreases their ability to build trust-based relationships.

Caterina Bulgarella, PhD, is a Leadership Strategy Fellow at the American College Maguire Center for Ethics in Financial Services.  Azish Filabi, JD, MA, is the Managing Director of the Maguire Center for Ethics in Financial Services, and an Associate Professor of Business Ethics.