In a white paper entitled Mind the Gap: Restoring Consumer Trust in Financial Services, the FSCS said that trust in financial services is low with just 36% of UK consumers stating they have trust in financial services firms.
The report, which was carried out by Warwick Business School and research consultancy Decision Technology, found that the biggest consumer gripe regarding trust was the concern that they would not be compensated for losses incurred as a result of poor financial advice. The FSCS plans to work with the industry to address this issue, it said.
More than 2,500 UK consumers were surveyed on their level of trust in financial service providers for the paper, which also looked at their views on a number of issues relating to the industry.
While the findings showed that 62% of consumers are aware of the FSCS’s deposit protection scheme, just 45% said they know about the compensation that the scheme can pay out for poor advice.
The FSCS identified four things that the industry could do to improve trust:
- Dealing with a poor reputation with regards to fair pay and not excessively rewarding senior staff;
- Acting transparently in customers’ best interests by offering the same deals to both new and long term customers;
- Telling customers when they would be better off with another product; and
- Providing more information to consumers about the FSCS which helps to instil trust in people.
Mark Neale, chief executive of FSCS, said the industry was starting to win back consumers’ trust in certain areas and had some ‘solid foundations’ on which to build.
“The industry can bridge the gap through greater transparency and collaboration. One finding we heard loud and clear is that raising awareness of FSCS protection among consumers is a key to restoring trust. The industry has come a long way on this, which is welcome,” he said.
“But the research shows a clear benefit to firms of being clear with people about FSCS protection. We look forward to working with the industry to help it address consumer awareness and understanding of FSCS protection.”
Professor Nick Chater of Warwick Business School who contributed to the report added: “The UK financial services sector has a reputation for high levels of competence. If the public can be justifiably convinced that the energies of the industry are being channelled into serving the best interests of customers, rather than the immediate goals of the firms themselves, then there is a real opportunity for dramatic improvements in the trust of the sector.”