Martin's blog

A question of trust

Posted on May 08, 2012

Folks in the financial services industry still quake in their brogues at the memories of queues outside branches of Northern Rock a few years ago. At the time it had all the hallmarks of a 'run on the bank', most vividly portrayed in the film "It's a Wonderful Life". But more substantially, it was the point in time where people first began to question whether the financial services industry- and banks in particular- were trustworthy and working in the best interests of the customer.

Much of what has happened since, including bank bailouts, payment protection mis-selling, regulatory fines, and anger over huge bonus payments has undermined further people's confidence in the financial services industry.

Of course the industry, quite rightly, points out that it contributes massively to employment in the UK, to Treasury coffers through tax payments, and to overseas earnings. But whilst that is all laudable, isn't it missing the important point, that businesses should be in business toserve the people, rather than, as all too often seems to be the impression, that they operate to exploit the people.

People have every right to expect that they can trust financial organisations. Too often the response to a collapse in trust is to throw money at new branding or a community investment project. But actions inevitably speak louder than words, and too often you hear that customer benefits are cut whilst the dividend, and senior pay, are increased.

The financial services industry must work harder to demonstrate that it behaves ethically and fairly. Mutual organisations have no shareholders and therefore work unambiguously in the best interests of their customers. Invariably that leads to better service, superior returns, and fairer claims handling. Or as one member of a mutual put it "There are no shareholders to pay and no fat cats... It is essentially a democratic organisation in which members have a say... I can get better rates and better treatment". (See www.ownedbyyou.org/your-views for more.)

More than that, recent research for the Association of Financial Mutuals, indicates that people trust Mutuals more than they do their PLC counterparts. To be more precise, people no longer trust PLCs- in the research the net trust score (the difference between those that trust and those that do not trust) was minus five for PLCs, meaning more people mistrust PLCs now than trust them.

By comparison, the population as a whole give Mutuals a net trust score of +32, and that rises to a remarkable +66 for people that are already a member of a mutual. That is gratifying evidence that companies 
Owned By You, are trusted by you.

Martin Shaw
Chief Executive, AFM