Part 2: Why Aren’t There High Trust Strategies in a Low Trust Industry?

The Financial Trust PuzzleIn my last post, I asked the question: If financial services are such a low-trust industry (on average), then why isn’t someone pursuing the obvious differentiation strategy of forming a high-trust organization?

The Reasons Why

I offered five possible reasons, and commenters added two more.  They were:

  1. Wait – some companies really are high-trust.
  2. The nature of the business is highly competitive – you can’t be high trust and stay in business.
  3. The industry is full of untrustworthy, greedy, anti-consumer people.
  4. The industry is so over-regulated that trust never has a chance to get traction.
  5. The media have a bias that will sink most attempts at high-trust organizations.
  6. Greedy shareholders force companies to be untrustworthy.
  7. The industry simply does not understand the nature of trust

Here’s my take on the issue. Please weigh in with your comments, below.

1. Some really are high trust. I’ve seen many parts of organizations – business units of 100 people or so – who absolutely do run high-trust businesses. But I’ve seen very few  who have pulled it off at the corporate level (one I know of first-hand is Bangor Savings Bank). I’m sure there are others, but I’m equally sure they’re the exception, not the rule.

There’s a reason the industry is low-trust – most financial companies simply are not trusted. The data are what they are and they’re not wrong.

2. The industry is so competitive that you can’t afford to be trustworthy. I’m totally not buying this. The financial industry may appear to be “competitive,” but it is also loaded with side deals, barriers to competition, and generally anti-competitive practices. Furthermore, some extraordinarily high-trust salespeople and business units, e.g. in wealth management, are that way precisely because they are high trust. Economics 101: competitive industries are marked by low profits, not high.  The financial industry is very – very – high profit.

3. The industry is full of untrustworthy people. I’m with reader Ronald on this one – the big majority of people I know in the financial industry are not untrustworthy, selfish, dishonorable people. Sure there are Madoffs, but there are in other industries too.  The problem is that good people can get enmeshed in bad endeavors. A whole lot of unethical corporate behavior isn’t due to lax moral standards, it’s due to habits, incentives, and organizational pressure.

4. The industry is over-regulated. There is more than a grain of truth here. If you are constantly investigated and given lie detector tests, eventually you’re very likely to decide that someone’s stealing and lying, and maybe you should try and get your piece of the pie. Conflating ethical behavior with legal behavior, or check-boxes with values, is death to ethics. We can have too much regulation – at the cost of moral behavior.

5. The media done it. Is there a systematic bias against financial industries on the part of media, mainstream or otherwise? I think you can make a case that a great number of media outlets are finely tuned to seek wrongdoing from the financial sector.  But not enough of a case. If Big Finance is so powerful as to control congress, evade prosecution, and continue to collect massive bonuses – then why wouldn’t they have the power to better control their own branding? I can’t disprove it, but let’s just say I’m skeptical of conspiracy theories.

6. Greedy shareholders are to blame. There’s a lot of truth here too. The emphasis on quarterly earnings, and particularly the massive bonuses given to fund managers based on short-term performance all drive up the emphasis on profit.  (Oddly, the short-term emphasis actually reduces the profit which would be available by pursuing long-term trust-based strategies). But this explanation is as valid for high tech as it is for finance, and the tech people constantly score better trust ratings.  I’m not convinced.

And the Oscar Goes To…

7. The industry just doesn’t understand trust. Yes, you guessed it, this is my nomination for best explanation. Here’s what I mean.

First, money may be the most emotional product imaginable. The dreams that can be conjured up by perfume are trivial next to those induced by a big MegaBucks lottery. A financial planner tells me that clients would sooner talk about their sex lives than their financial lives. Money has implications for our status, our future, our children; it’s a nearly pure-emotion product.

And yet the financial industry insists on selling money services on a non-emotional basis. Credentials and qualifications are what financial planners and wealth managers lead with. Fee-only planners insist that because they’re not commissioned they are structurally more trustworthy. Bankers are fond of touting product features. About as far as emotion goes in the financial industry is to invoke symbols like the Rock of Gibraltar, or ads featuring smiling retirees who are moonlighting from pharmaceutical spots.

What you get by promoting the Merrill Barney brand, or the Smith Lynch brand, and the credentials of their employees is weak, thin trust – trust that’s getting weaker and thinner with new media and smarter consumers. Rich trust comes from personal interactions, with individuals who aren’t afraid to get personal. Emotional products call for emotional connection in the sale. Financial people are scared to death to get personal.

Second, financial institutions tend to think that trust is mainly institutional – they can’t grasp that trust at its heart is dyadic, about two people. They worry about their professionals “stealing clients” when they leave – as if the clients were property of the institution – which amounts to devaluing the key interpersonal relationships that can develop between professionals and customers.

Third, financial institutions too often try to have it both ways: they want to appear trustworthy so that clients will trust them – but they rarely turn around and trust their customers. If someone constantly asks you to trust them, but never trusts you, then trust is rather quickly lost. Is your local bank branch empowered to make a spot decision to trust you? Unlikely. And don’t tell me no-doc mortgages were an exception – those were driven not by trust, but by greed on the part of the lenders, suborning falsehoods from customers.

Fourth, no other industry I know of forces profitability analyses to such a detailed level. Not only is the timeframe for analysis very short-term, but decisions are made based on highly quantified, narrowly defined analyses. What happens if we give people a 5-day grace period – if we lose money, forget it. What happens if we tweak the eligibility standards here – if we lose money, forget it.  To some extent, this is because the product of finance is money itself – subjecting money to financial analysis is both obvious and necessary. But it does mean there is very little emphasis put on long-term returns, or balancing offsets. Sponsoring golf tournaments is about as long-term and qualitative as it gets, and I bet every company doing it has some details specs on why it’s profitable.

Finally, as noted in point 4 above, an industry which is tightly regulated can tend to lose track of the distinction between compliance and ethics. “I am not a crook” ends up being the defense against ethical complaints, and that doesn’t do the job.

So there’s my case: I think the main reason the financial industry gets such low rankings on trust is because they simply, fundamentally, do not understand the workings of trust.

Their people are neither stupid nor venal. But the cumulative impact of putting rational over emotional needs, processes over interactions, short-term over long, regulations over ethics, is such that financial organizations simply don’t have much of a clue when it comes to implementing trust.

Too many trust initiatives end up focused on customer satisfaction methodologies, CRM systems, PR and messaging campaigns, and trumpeting credentials. Rarely do they get to the heart of trust – the personal connection between a provider and a customer.

Remember who was number 1? Nurses. Just think about the difference between finance and nursing. Our financial companies could learn a lot by studying how nurses create trust.

7 replies
  1. Chris Downing
    Chris Downing says:

    Well bank are not run by people who need to be good at realtionships – guys who’ve been on the frontline – sales people. They are run by Marketing, Accountants, Lawyers. (Analysis and Target Markets, Number Counting, Manipulates the Rules and Check the Risks.)
    I once heard a high level marketeer say, “I used to do sales as part of my induction – now I’m in Marketing, thank God i don’t have to deal with the punters anymore”. I think my experiences with Lawyers and Accountants would make the Marketeer’s comment quite tame. Nobody much in theManagement Reams of thesse big comapnies will have talked to an actual customer for a long time. So the first catalyst that errodes trust is Arrogance.

    Ten years ago I was doing a project for the division of a leading UK Bank that managed the stock options and share dealing for the UKs. We helped them develop a project to get closer to clients, stop their shrinking market share (they were losing 25% a year!), build a relationships based route to new clients. Everything worked and the clientsband new clients loved it.

    I tried to take this to the main division dealing with businesses – a regular source of dreadful press articles – it seemed an appropriate sharing of experiences within the comapny., I got roasted by the Director in charge for looking for a ten minute meeting to tell about the success. The Dircetor who appointed us in Shareholding got roasted as well – and you know what – he left, joined the competition, implemented what he learn from us and beat up on his previous employer.

    Has the bank got better – no. Do the press still beat them up – yes. Has shareholder value declined – yes. Major fault – Arrogance.

    And lastly – you, And other professionals that work in the realtionship and trust business (including me in the past) know how hard it is to convince senior management of these big comapnies to look at relationship building with customers – the source of all their revenues. The biggest blocking factor to having any sort of meaningful conversation about trust and realtionships – Arrogance.

      • Chris Downing
        Chris Downing says:

        Two of my children work in the City of London in banking, their friends do as well, so I know there are lots of people who try to do the right thing, people who would be doing what you would commend. But there are a lots of guys at the top that I would call difficult on a good day and dysfunctional, other days. It took all of them a long time to reach the top – and the journey has scarred them. They are scarry arrogant by anyone’s definition.

          • Chris Downing
            Chris Downing says:

            There are only four big players in the share management market so you could work it out – the clues were there all the time – haha.

            Andrew Sobel went on to do a lot fo work for them in this area – so his take when we discussed it was that I brought it down on myself with my gate crashing tactic. Having said that, my methods of approaching Board members to set up meetings went into three 7 minute videos I did for another huge corporate. They went on to distributed it to thousands of sales people Worldwide – so someone thought my tactics were sound.

            I stick with my observations – quite a lot of guys at the top are way too arrogant and it influences their judgement.

  2. Ronald
    Ronald says:

    Great article. I agree that trust is misunderstood at banks – I still think (as you do) that many things impact this level of mis-trust of banks. As I’ve already commented on those in “Part I,” I’ll focus on your Oscar-nominated thesis point-by-point:

    1) Money is emotional, and bankers fall prey to simply selling products that solve problems. I run into this with my wife when she has a problem that is causing her stress… she wants to talk through her feelings, I want to find a resolution. My solution solves the problem, but doesn’t de-stress her. Perhaps banks have this same problem… a frazzled customer is losing sleep because they are not saving enough for retirement. Our solution? We have IRAs / savings / investments…. how much do you want to put in? Nothing about empathizing with the customer; we are just solving the problem. Perhaps this is the nature of a male-dominated industry… men typically forget there are people behind the problem?

    2) I agree with this – but also in reverse. I’ve seen bankers use their customers as pawns, as well. “If you don’t give me a massive raise, I’ll take my customers to a new bank.” The customer is still in the middle and a degree of distrust has to be raised when their banker who just sold them on moving everything to a great bank is now moving on and saying “come to this bank… it’s greater and better than everything else (except for the next bank I’ll work for).” I don’t know how to solve that one…

    3) Great, valid point. Banks don’t trust customers.. especially now that so many will simply walk away from their commitments. I worked for a bank a few years back where loan customers that personally guaranteed a loan would, in court, tell the judge they didn’t feel obligated to pay their loans back because the economy went bad. These were once-good customers that paid their notes on time, but when the going got tough, they flipped us the middle digit. No remorse… in fact, on several occasions, it was the bad-debt customer suing us because we locked their doors. Not only is it not their obligation to pay back commitments, but it is our obligation to give them the property for free. You look at the mortgage crisis, and there is PLENTY of blame to go around – greedy banks, naive CRA regulation, Fannie/Freddie chaos, and foolish consumers that bought houses they can’t afford. When I came out of college I was offered a loan for 12x my salary; greedy banker. I’m not a fool, so I didn’t take it. I suppose the main point here is that trust has to go both ways which is 100% accurate; but banks simply can’t trust emotional (see point #1) actors to make wise decisions when it comes to finances. I made the right choice on the house (for me, real estate is non-emotional), but if the choice is feeding my kids or paying my car note, my kids will eat and the bank will lose money. It’s tough to trust someone that you know will screw you.

    4) Banking is a volume business – relatively low margins on huge volumes. Are banks profitable – definitely, if they are run well. Go visit the banks that reduced their standards. Oh… you can’t, they all failed in 2008-2011. High qualification standards and strict controls is the only way to make money at banking. I’m not saying this is an excuse for what is perceived as unethical; I just don’t see how it can change.

    5) I think this hits it on the nose. I struggle with this greatly and regularly clash with people that skirt regulations, staying just within bounds, but pushing to make a few extra bucks. I love that my current bank is not like that; we really do what needs to be done, do it the right way, and are open and honest with customers. I’ve seen our bankers tell customers they can get a better deal elsewhere, and customers will still open with us because they trust us. Its highly rewarding – sure we lose customers to competition, but everyone of those lost customers checks back with us when they need something new.

    One last story, then I’ll call it a day… we had a kid that was very sick when he was young (which is definitely emotional). Doctor after doctor couldn’t figure it out until finally a specialist came along. Our insurance had just changed, so we had no idea if it would cover and extremely expensive test. We didn’t have much money, but said let’s do it – as long as you can take payments if the test isn’t covered. The doctor saw the emotional toll it was having on us, and empathizing with us he said that if insurance didn’t pay for it, he would. No prompting, we certainly would never ask for handouts, and I would never even considered that a relative stranger would dream of forgiving a fee that was many thousands of dollars. Insurance ended up paying for it, and in the end the doctor was out nothing…. but he was willing to be. I don’t know of many business or individuals that are that trustworthy, but this man is. I doubt banks, lawyers, car salesmen, or congress will ever be like that, but it sure would be a great…

    • Charles H. Green
      Charles H. Green says:


      Please excuse my inexcusable delay in responding to your most excellent commentary, above.

      To anyone reading this message thread – go back and feast on what Ronald has written here.

      Many thanks,


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