Advisers Most Trusted Source for Investing Information

Brokers/advisers are the most trusted sources to provide accurate information about investments, investing, or the markets, according to the 2010 Edelman Financial Services U.S. Trust Barometer.

Brokers/advisers received trust from 68%, followed by friends or family (61%), and portfolio managers (55%), while CEOs were judged least-trusted (32%), according to a release of the results of the survey of 500 “informed publics” ages 25 to 64. However, when broken down into age group, the younger demographic (age 25 to 34) had even higher levels of trust (75% for broker/adviser, 73% for friends or family). The survey defined an “informed public” as college-educated, in the top 25% of household income by age, and reporting significant consumption and engagement in business news and public policy.

Possibly reflecting their deep turmoil during the past two years, the banking and insurance industries ranked as the least trusted in the U.S., with banks recording the only slide in faith in the past year. In the U.S., trust in banks fell to 33% in the 2010 survey from 36%, while trust in insurers was the lowest in 2010 at 32%, although that level improved from 29% in the previous survey.  Only media companies matched the 32% low. Technology ranked highest with a trust level of 81%.

However, in the category of trusting institutions, those surveyed ranked community/regional banks as the most trusted financial institutions in the U.S. (79%), with mutual fund companies (59%) and life insurance companies (52%) in second and third. This also varied among age group, with those surveyed age 25 to 34 having significantly higher trust in all financial institutions than those age 35 to 64.

Information Sources

Although the broker or adviser was the most trusted source, it was not the most widely used source of information about financial information; only 64% of those age 25 to 34 and 54% of those age 35 to 64 said they use a broker or adviser at least monthly for financial information. Those surveyed get their information about finances from a variety of sources, most commonly including business TV news (91% of those age 25 to 34, 88% of those age 35 to 64), family and friends (91% of those age 25 to 34, 83% of those age 35 to 64), and the print or online versions of local newspapers (84% of those age 25 to 34, 81% of those age 35 to 64).

However, among traditional, corporate, and digital vehicles, none was more widely used than the others. That demonstrates a need for financial services firms to use “a portfolio of traditional and online communications vehicles to convey their messages successfully,” said Jeff Zilka, general manager, Edelman Financial Communications.

Corporate Reputation

For all industries, corporate reputation is now based on trust and transparency as much as leadership and share-price performance, the survey found. "Has transparent and honest business practices," "is a company I can trust," and "offers high quality products or services," were cited by 82%, 80%, and 79% of respondents, respectively, as important to the overall reputation to the company. However, fewer than half of respondents cited "is an innovator of new products, services, or ideas" (48%), "has highly-regarded and widely admired top leadership" (45%), or "delivers consistent financial returns to investors" (45%) as important to overall company reputation. Furthermore, among all industries in the U.S. (not just financial services firms), financial returns mores to last place among company reputation factors.

Those surveyed also said they consider “quality of communications” (75%) and “customer service” (70%) as important as “price” (70%) and “performance” (72%) in influencing reputation and trust for U.S. financial-services companies.

“We’ve seen significant changes in how people evaluate corporate reputations and the factors they view as most important in shaping their decisions,” said Matthew Harrington, president and CEO, Edelman U.S. “Just three years ago, financial performance ranked as the top criterion for all U.S. companies. It now scores at the bottom, replaced by transparency and trust. In financial services specifically, companies must realize that transparency via frequent communication and high-quality customer products and services are as essential to creating and maintaining investor trust as superior returns and five-star ratings.”

The vast majority (93%) of those surveyed believe problems exist in the industry that must be addressed and 63% said they think financial institutions need more regulation. Only a handful (7%) thinks the industry is problem-free, and 8% believe financial services should be regulated less than they are now. As for who should be most responsible for addressing the problems facing the financial services industry, 67% of respondents said all groups should work together, while 21% said government agencies. Only 9% of those surveyed said financial services companies should address the problems, while an even smaller group (2%) believed it should be Congress.

The 2010 Edelman Financial Services U.S. Trust Barometer sampled 500 informed publics in two age groups (25 to 34 and 35 to 64) in the U.S. and was produced by research firm StrategyOne and fielded by World One from October 13 through November 8.

More information is available here.