Speaking at yesterday's The Question of Trust conference in London Professor Christine Ennew of the University of Nottingham told delegates the current low level of public trust in the financial services industry will have serious implications for society at large unless something is done about it.
Ennew said a feeling of forced trust and people purchasing financial services products because they have to or feel they have to, has risen by almost 50% since the recognised start of the financial crisis in 2009.
She presented research to show that customers who "actively trust" financial companies will hold more financial products than those that are simply forced into buying products such as household, motor or life insurance.
The decline in levels of active trust since 2009 has resulted in individuals having less protection, less insurance and saving and investing less. She claimed this would ultimately increase dependence on the state to provide replacement welfare.
Her research also showed that when investing people trust recommendations from friends and family by as much as five times more than price comparison websites.
People also have more faith in the specific financial institutions they deal with directly by ten times as much rather than how they feel about the institutions generally.
The Question of Trust campaign was formed earlier this year by Shane Mullins, chief executive of Fiscal Engineers and is supported by the Institute of Financial Planning, The Financial Services Research Forum at the University of Nottingham, and Credit Action.
The campaign was set up in recognition of the falling levels of trust in the financial services industry.
Ennew said: "People aren't saving sufficiently for the future. Part of that is because there's a breakdown in trust. They don't trust the products. They don't trust the companies that promote the products. They don't trust in savings being a good thing. Consumers are reluctant to use services they don't have trust in.
"Our starting point has to be to ensure that the industry and the organisations within it understand the nature and significance of trust. The financial services industry is one of Britain's great success stories. However, parts of the industry have been responsible for some of the biggest scandals in business history. It is for the whole industry to, first, accept that is the case and, second, do something about it.
"There is vulnerability, risk and interdependence associated with the purchase of financial services. The buying process for financial services is complicated by the variety and complexity of the products available. It is this imbalance of information and knowledge that creates the great need for trust at the centre of any financial transaction."
Mullins said: "There has been a damaging run on trust building up in the financial sector over many years. We are now at crisis point. If we fail to arrest these challenges, I fear we will breed a generation of mistrust and the social consequences, and impact, of this could be profound.
"If we are to change, we need to build a culture of doing the right thing within the industry. The attrition on trust is so great, and the issue of such importance that it simply can't be ignored.
"For far too long the industry has held a mask up to itself instead of a mirror. Certain executives have been accused of managing their share option schemes rather than their businesses, and some political leaders of managing their reputations rather than the real interests of the country.
"We need a humble response and root-cause action right across the industry, coupled with strength of leadership and a commitment to take the long-view to change things for the better."
The Question of Trust campaign is seeking to bring together a national and unified professional standards approach across the entire industry. It has committed to produce a baseline measure of trust in the first of an annual study into trust called the Money Trust Index, making initial and on-going recommendations as to how trust can be engaged with and improved across and within the industry.
The research also revealed that organisations outside of the financial services industry that were most cited for trust were John Lewis, Apple, Marks and Spencer's, Virgin and BMW.
