Trust influenced by consumer experience, relationships

Why do consumers trust some financial institutions more than others? And what leads to that trust?

Multiple factors influence trust, as researchers at The American College’s Carey M. Maguire Center for Ethics in Financial Services explained at a recent webinar.

A difference in trust exists between consumers who have a personal relationship with a financial entity and consumers who are familiar with that entity but don’t have a relationship with it. That difference is called “the experience gap,” said Jason Pattit, associate professor at the University of St. Thomas (Minn.) and a fellow at the Maguire Center.

Researchers surveyed consumers on how much they trusted various financial entities and whether they had a personal relationship with that entity or whether they were familiar with it but didn’t have a relationship. The results were compiled into a trust index between 1 and 100, with a score of 90 or higher indicating a very high trust.

Among the financial entities studied, the two greatest experience gaps occurred with investment app companies and online-only or mobile banks. For investment app companies, the survey results showed a trust index of 71.9 for consumers who had a relationship versus a trust index of 52.6 for consumers who did not have a relationship. Online-only or mobile banks showed a trust index of 70.9 for consumers who had a relationship as opposed to a trust index of 52.4 for consumers who did not have a relationship.

Credit unions had the highest index – 77.5 - among consumers who had a relationship with them, followed by community banks at 76.3. National banks had the lowest index – 69.7 – among consumers who had a relationship.

Source: The American College

What influences trust?

Consumers generally trust based on several different psychological factors, Pattit said. They are:

1. Visible reputation: captures whether a company has good reviews from reputable sources and provides transparent information about its services in a public space.
2. Value alignment: covers aspects of company behavior like supporting the community, understanding the needs of different individuals, having similar values, and caring about individuals.
3. Interest protection: covers aspects of operations such as protecting an individual from fraud, having clear fee structures, and resolving problems quickly.
4. 4. Referent trust: indicates that consumers trust because they know someone with a relationship with the company.
5. Personalization: points toward efforts a company makes to know the individual and help them individually.

Recommendations for advisors

Based on the information gleaned from the research, Pattit made three recommendations for financial professionals to increase consumer trust:

• Have consistent values in all channels.
• Create “experience points” for consumers.
• Recognize that bad experiences spill over.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.

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