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Trust Must Be Earned, Not Created By Regulation

By Dan Candura, CFP

Every year public relations firm Edelman conducts a global survey on trust. This is the 12th year of the survey and it is a very comprehensive look at the state of trust around the world. The survey is conducted online with informed members of the public – college grads with incomes in the top 25 percent of their country who also follow public policy issues on a regular basis.  Each interview takes 20 minutes. The Edelman Trust Barometer is a very credible view of the state of Trust in the world today.

Trust Declining for Financial Services

And, as you might expect after the financial crisis and ensuing weakened global economy, the picture is not a positive one for business or government – especially financial services. In fact, the number of respondents who feel that financial services companies will do the right thing was just 45 percent – a decline from the 48 percent figure a year ago. If ever there was a need for a fiduciary standard of care in financial services, it is now. As a CFP professional, I have an ethical obligation to place my clients’ interests ahead of my own and to recommend what is best for them. This fiduciary standard is one of the hallmarks that distinguishes CFP professionals from the rest and would go a long way to reduce the lack of trust the public has in our profession. So why is it not more widespread?

Part of the reason may also lie in the Edelman results. The trust ranking for government officials dropped to the lowest level in the 12 years of the study. Only 29 percent of the public viewed government officials as credible.This was a drop of 14 percent in a single year. In fact, government officials were considered to be less credible than business leaders in every country surveyed except Singapore. Clearly, the public does not expect government officials to do the right thing.

And Now for the Paradox…

When asked in the survey if government regulation of business should be increased, 49 percent said yes. That’s right – almost half want the organization they trust less to impose more regulations on the businesses that they trust more. The results of such an effort cannot be positive.  Either we end up with more regulations that don’t work (since government officials cannot be trusted to do the right thing) or we end up with more regulations that work but the public doesn’t believe in them (since they don’t trust either governments or businesses.)

Regulation May Increase the Level of Distrust

The solution to this paradox lies within each of us and our ethical standards and not with outside forces. No amount of government regulation can solve the issue and in fact it may even increase the level of distrust. In the US, neither Sarbanes-Oxley nor Dodd-Frank stemmed the tide of distrust. Instead, trust must be earned. It comes from doing the best for our clients’ every day. It grows with each interaction where we do the right thing for the customer and place their interests first. We change public perception one relationship at a time.

I only hope there are enough of us to make a difference.

1 comment to Trust Must Be Earned, Not Created By Regulation

  • DA Burger

    Goverment can talk however lack dismally in walking the talk.
    Financial services’ decline in trust in this industry is uncalled for.We should stop drawing adverse attention to ourselves and rather do more to market the “brand”.If we fail the client cannot thrive.

    Did the advent of regulation and the bad publicity thereto lead to this distrust.

    Just a thought.

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