Markets

What Financial Firms Can Do to Regain Customer Trust

By Alain Sherter

Updated on: August 11, 2010 / 7:17 AM EDT / MoneyWatch

When it comes to customer trust these days, bankers rank below teachers, mail carriers and judges, but above lawyers, advertising pros and (eek!) journalists (see table at bottom).

As the country struggles to recover from a lending-induced economic collapse, here's how rough it is for financial professionals seeking to patch up relations with clients. Some 48 percent of American consumers feel financial companies never look out for their best interests, according to market research firm GfK Financial Services. Just under a third think such firms always try to sell them something.

Despite such perceptions (which certainly coincide with my own experience dealing with banks), studies suggest that relations between financial firms and their customers are starting to heal, Doug Cottings, managing director with GfK, told me in an interview. And while there's no magic ingredient to speed that process, one factor is essential: communication.

"What happens in these turbulent times is that if there's not some communication to frame the situation, provide some facts, and explain what's happening and how it impacts the customer, then it can really impede trust," he said.

That goes well beyond slick ads and snappy messaging. A company can spend big bucks trying to foster a sense of trust, but such efforts will amount to nothing unless each and every customer interaction reinforces the relationship. And there are no shortcuts -- trust is built (or rebuilt, in financial services) over time.

With that in mind, here are some of the key things customers want from their banks, insurance companies and other financial firms. How companies deliver might differ according to their size and business model, but the ingredients are the same for all firms.

A company that understands them and their needs
Active communication
Accessible and knowledgeable representatives
An ability to resolve problems
Clarity, especially with billing, fees and performance

Financial executives aren't dummies, of course -- most understand perfectly well that cultivating trust requires effective communication. But with the economy stuttering and many firms coping with layoffs, finding time to engage with customers often takes a back seat to other considerations.

Although he's too discreet to name names, Cottings cited as a cautionary tale a company catering to high net-worth clients -- customers with millions in financial assets -- that hadn't bothered to contact them in more than a year. If communication breeds trust, nothing kills it like silence.

"In the absence of information, people assume the negative -- it's human nature," he said.

Financial firms face another challenge in regaining consumers' trust. Ever notice your coworkers standing around the water cooler chatting about, say, how much they love their free checking account? Me neither. Most people are highly focused on their finances, but industry research suggests they're not especially interested in financial services. According to a recent report by GfK:

[C]onsider that, in a time when we're emerging from one of the most difficult economic environments in recent history, financial topics don't even rank among the top 10 issues Americans in general are most interested in.

Talk about a one-two punch: Low trust, middling interest. Fortunately, there are things financial services companies can do to win back customers. Here are some areas GfK advises focusing on:

Statements and reporting. Instead of only showing what happened, explain why and how it can be avoided (if negative result) or repeated (if positive) in the future.
Life events. Life-changes affect financial needs. Proactively communicating the impact builds trust, even if it means a loss of revenue for your company.
Issues that surface in the media. If significant enough to trigger concern, communicate and explain unfavorable media coverage to clients and stakeholders.
Milestones. With regular frequency and aligned with your business model, having face-to-face, phone, online or other regular reviews improves trust with clients.

Different approaches also may work with different client segments. In a 2009 survey, for instance, GfK found that younger customers (under age 35) specifically wanted more advice on their monthly statements about how to improve their financial situation, along with more online and mobile account features.

As for which financial firms are doing best at restoring a sense of trust with customers, it's a mixed bag. In general, though, smaller players such as community and regional banks, as well as credit unions, do better than the big boys.

In banking, it's companies like Arvest Bank, Bank of the West, Flagstar Bancorp (FBC), Sterling Savings Bank and United Community Banks. In insurance, GEICO and Erie Insurance score high marks, while wealth management firms including Edward Jones and LPL Financial also are known for focusing on customers.

That's no surprise. Smaller firms often emphasize customer relations as a matter of competitive necessity, while industry consolidation and high employee turnover makes it tough these days for larger companies to deliver the kind of personal service that builds brand loyalty.

But all financial institutions can benefit by listening more closely to what their customers want, and responding in kind.

"Given what's been going on for the last 24 months, it's hard to get through with a message," Cottings says. "But we're seeing some encouraging signs, some glimmers of hope that show an uptick in brand perception."

Financial execs can take heart in something else, too. On the trust scale, they're still miles ahead of politicians (click on chart to expand).

Charts from GfK Financial Services and Edelman; image from Flickr user TerryJohnston
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