Can I trust the world? It is an existential question. It is also a subject of theory and ongoing research in the social sciences. The development of trust is the first stage of psychosocial development, occurring or not during the first two years of life. It affects everyone 24 hours a day, 365 days a year. Trusting others is necessary for survival and allows societies and economies to function effectively.
Trust has surfaced in news reports and social media throughout the pandemic. Sandra J. Sucher, an internationally recognized trust researcher, discussed this in an interview for her book The Power of Trust: How Companies Build It, Lose It, Regain It. Researcher and storyteller Brené Brown has hosted podcasts on how to approach the topic of trust in a productive and actionable way. Posting on LinkedIn, Brown included a quote card that went viral that read, “Trust isn’t built in big, quick moments. It is being built in tiny moments every day.
Fortune has dedicated a special report to the theme of trust. In “Trust and Consequences,” the magazine focused on trust and business ethics, presenting a collection of stories that convincingly demonstrate “why it’s time for a new era of responsible business.” The takeaway: Trust has the potential to create exceptional success if developed, but it can destroy the most successful business.
In the financial sector, trust is a major factor in driving consumer decisions. Trust enables the financial services industry to provide products and services to customers. Understanding how to build and maintain relationships based on trust is fundamental to connecting with consumers. Trust is also pervasive – it is relevant at all levels within financial institutions, regardless of job title and seniority. We see this summed up in the words of the late Professor John O. Whitney of Columbia University Business School, who said: “A business that is at war with itself [misaligned] will lack the strength or focus to survive and thrive in today’s competitive environment.
A signature theme
Trust is a signature theme for the American College Cary M. Maguire Center for Ethics. We believe that building relationships based on trust can be a strategic asset for financial institutions.
We have studied trust in financial services systematically and objectively over the past year to develop insights and strategies that can help financial services leaders navigate this vital topic.
Our multi-method research addresses some functional challenges in the financial industry. For example, we know that there are disparities in underrepresented groups’ access to capital and banking services, but what steps can financial institutions take to stand out as trustworthy to historically underrepresented groups? represented and those whose trust is low? Our research can help leaders better understand how expectations of trust and the factors that influence those expectations affect the development and success of products, services and relationships.
A nuanced view
Our findings offer a nuanced view of confidence in the financial sector. Interestingly, while Edelman’s existing survey results showed that financial services remains one of the least trusted industries, we found that when we look at trust in the context of service industries such as healthcare, education, telecommunications, state/local government, media/entertainment and federal government, financial services come right in the middle. Another notable finding is that among the types of financial service providers, consumers place particular trust in community banks and credit unions. When we looked at generational differences, we found that millennials had the highest levels of trust in service industries, including financial services.
Household income also affects the level of trust. This is important because it helps build a business case for financial inclusion. As income increases, trust in all services also increases. While low-trust consumers are more likely to have low income and high-trust consumers are more likely to have high income, both seek value from the financial institutions they engage with and both aspire to create wealth. This is a timely discovery as demands for corporate leadership to close the wealth gap and promote economic empowerment in the United States persist. Provocative, thought-provoking analyzes include a National Bureau of Economic Research working paper, a Fortune article that questions the existence of a financial literacy gap, and a collective impact framework for financial literacy. American College Center for Economic Empowerment and Equality.
Contrary to what most people believe, confidence is not a fuzzy feeling or a present or absent quality. Trust is actionable. As a key leadership skill in the global economy, trust is a muscle that leaders can exercise by developing strategies to create, grow, expand, and restore it among stakeholders. Our goal is to equip executives and financial institutions with the stakeholder perspectives and leadership tools needed to build trust and thereby advance business ethics.