Do financial services firms profit by earning investors’ trust?

The power of a brand’s profit potential hinges entirely on the degree of influence the brand has in consumers’ purchasing decisions.

When customers, clients or advisors invest their money with you they are expressing their trust in your company. Unfortunately, few financial institutions have provided a clear and compelling argument for why they should be trusted. Your ability to attract assets is directly related to how people feel about you as a company as much as they may be attracted to the past performance of your investment products.

Recently a report in the NY Times sheds some light on the relationship of trust to your bottom line.  Forrester’s annual Customer Advocacy rankings, ranks nearly 50 financial services firms in the United States by the percentage of each firm’s customers who agree with the statement: “My financial provider does what’s best for me, not just its own bottom line.”

So if trust in your brand is so important to your bottom line, why is that Banks are routinely ranked lowest in terms of customer advocacy or trust. The bottom seven of this year’s rankings, first to last, are Bank of America, Chase, Capital One, TD/Commerce, Fifth Third, Citibank, and in last place, HSBC.

“Customers feel banks are preoccupied with their bottom line. They are public institutions who are in business to make money for their shareholder and inevitably, that shows to customers,” Forrester vice president, Bill Doyle said.

Customer advocacy/trust rankings are a predictor of customer retention and attrition, and customers who rate their financial institution high are more likely to consider their firm for additional products. In contrast, customers who give their banks a low ranking are most likely to switch in the next year and are “going to be reluctant to put any more money and open new accounts at those institutions,” Mr. Doyle said.

Every financial services firm should consider how they can build trust in their brand and not rely on flogging historical investment returns or low introductory rates. These are not the way to build a sustainable competitive advantage. Doing the right thing for your customer, your employees and society is essential. And effectively communicating your values to customers, clients and advisors will make a huge difference in growth, retention and your bottom line.

The TD Great Canadian Shoreline Cleanup has now grown into the second largest cleanup in the world, powered by Canadians, this program allows people from all regions and all walks of life to make a positive difference to their environment. Last year alone, over 63,000 Canadians registered for the TD Great Canadian Shoreline Cleanup.