Trust in Financial Institutions and Professionals MacroMonitor Marketing Report Vol. VI, No. 2 April 2003
Or, How I Learned to Stop Worrying about the Markets
and Love My Broker
In the past several years, consumers have increasingly become more experienced and sophisticated in handling their personal finances, particularly with regard to investing. The combination of their increased involvement in the financial markets and the financial upheavals that they have experienced unfortunately also translates into less trust in many financial institutions and intermediaries.
In 1994, well before the market run-up of the late 1990s, the MacroMonitor questionnaire contained two series of questions that asked household financial decision makers how much they trust financial institutions and their intermediaries. In 2002, well after the market peaks of March 2000, we asked the same series of questions using the same methodology. The highlights resulting from this comparative analysis of the 1994 and 2002 household-survey responses include the following:
HOUSEHOLD TRUST IN FINANCIAL INSTITUTIONS
In the past several years, consumers have increasingly become more experienced and sophisticated in handling their personal finances, particularly with regard to investing. The combination of their increased involvement in the financial markets and the financial upheavals that they have experienced unfortunately also translates into less trust in many financial institutions and intermediaries.
In 1994, well before the market run-up of the late 1990s, the MacroMonitor questionnaire contained two series of questions that asked household financial decision makers how much they trust financial institutions and their intermediaries. In 2002, well after the market peaks of March 2000, we asked the same series of questions using the same methodology. The highlights resulting from this comparative analysis of the 1994 and 2002 household-survey responses include the following:
- Consumers continue to regard depository institutions as the most trustworthy, although that level of trust has declined during this eight-year period.
- The proportion of household financial decision makers who say that they trust insurance and mutual-fund companies a great deal increased significantly.
- No changes occurred in the level of positive trust for full-service and discount brokerages (less than 10% of U.S. households), but the percentage of households that hardly trust them has gone up.
- The level of trust in financial institutions does not coincide with that of household trust in specific financial intermediaries. The proportion of households that trust full-service brokers, discount brokers, or mutual-fund company advisors has increased from 1994 to 2002, as has the proportion that trusts certified financial planners or independent financial planners.
- The significant decline in "don't know" responses indicates that more households have an expressed opinion of the trustworthiness of financial institutions and intermediaries.