Honesty and fairness: what finance firms must do to rebuild their reputations and trust
I write a lot about trust. Why? Because I believe it’s at the heart of the relationship between people and the companies that they deal with. In fact the last two years I’ve written 158 articles about trust. And that’s not because it’s an obsession, it’s because – after the banking crisis and the PPI misselling scandal – it’s become an aspiration for all finance firms.
They know that the only way to build their reputation is to gain the trust of customers.
Take Royal Bank of Scotland boss Ross McEwan. His first move on taking over earlier this year was to set out a programme to return the bank to a position where it is trusted, rather than vilified. He hopes that by 2020, RBS will be “the most trusted bank in the UK”. If he’s to be believed, bank branches will return to being places where people are happy to go for some honest financial advice.
That’s the hope. How is it going in practice? RBS, which Ross McEwan admitted was “the least-trusted company in the least-trusted sector of the economy”, seems to have confirmed that existing view. It did that by announcing it is closing 44 more bank branches, 14 of which are the “last bank in town”. Withdrawing the last bank in town is normally the death knell for the local community, leaving businesses and individuals worse off.
That’s not the action of a trusted bank. It does not underline a commitment to customers. The stark message it sends out is “we don’t care about customers”.
This week the Financial Conduct Authority reported that the mainstream banks have been ripping off loyal customers by paying them low interest rates. It said that banks pay lower interest rates to customers who have stayed with them for years.
That’s not the actions of a trusted supplier. That’s the actions of a devious, manipulative supplier intent on squeezing as much profit as it can out of unsuspecting people. Ironically the people most hit by this disgusting tactic are those that trust their bank the most. They wrongly presume – often because they’ve been with the same bank for decades – that the interest rates paid will be reasonable.
Oddly enough a reader got in touch last week to complain about his bank writing to him to report changes to his Isa. The changes turned out to be a 25 per cent reduction in the interest rate paid. What I found most interesting about that was the reasons the bank gave for the rate reduction.
This is what the bank said: “Savings interest rates in the UK marketplace have continued to go down. Because of this, we reluctantly need to make changes.” The bank, was our old friend RBS. What do you think it means when it refers to the “UK marketplace”? It means the banks and building societies that offer Isas. Banks such as RBS.
So if saving rates in the UK marketplace have gone down, that’s because banks and building societies have put them down. Banks such as RBS. In other words, RBS justified its decision to slash rates by blaming actions that it has already taken in reducing rates. It would be laughable if it wasn’t so tragic.
It really is pointless making grand claims about trust if you then succeed to batter your reputation again and again.
TSB is another one that has resorted to weasel marketing words to build up trust rather than bothering to actually deliver better service and products. It relaunched late last year with the bold claim to be a local bank. It said: “We use every penny TSB customers deposit with us to fund mortgages and loans for other TSB customers. And nothing else.”
Nothing else. That sounds quite grand, but it’s a completely empty promise. Why? Because to become a TSB customer, you just need to apply for a loan. So the TSB’s promise should more honestly say: “We use your money to lend to anyone.”
Talking of relaunches of long-dead financial brands, Sun Life has just reappeared. It says it is now planning to “democratise financial services”. And it’s a backing that intention up with hard cash – some £250m will be spent on marketing the brand over the next five years. I reckon it needs at least that to repair its tarnished reputation.
What do most people think of when you mention Sun Life? They think of poor Michael Parkinson, reduced to flogging dodgy over-50s insurance plans. They were dodgy because many people who took them out ended up paying much more into the plan that they could ever get out. In short, most people would have been better off saving cash into an Isa or deposit account. Now Sun Life hopes to put its murky past behind it. Good luck with that!
If any financial firm really wants to democratise financial services it has to offer three simple things: honesty, fairness and simplicity. Companies must offer reasonably priced products with no hidden charges and fair rates. And they must tell their customers how much profit they make out of them and what happens to their money.
There’s a growing demand for ethical finances: people want to know that their cash isn’t funding the slave trade or supporting repressive regimes for instance. Companies which are open and honest about the way they do business and who they do business with, will be the future winners.
Take the small ethical bank Triodos. It publishes details of where all its customers’ money is used. It says: “We only lend our savers’ money to people and organisations who are working to make a positive impact – culturally, socially and environmentally.”
The world of ethics, reputation and trust is more than just persuading people that you’re not going to rip them off. It’s about building a mutually beneficial relationship. A relationship where customers join company boards and shareholders vote down excessive bonuses. It means a world where financial firms aim to help people make the right financial choices, rather than just squeeze them for profit. It means providing them with what they need, not just fobbing them off with what firms want to sell.
When that happens trust will return. Reputations will be rebuilt. And ethics won’t be a challenging concept, but a central part of any company’s role. But to get to that, companies must start to act responsibly, not just talk about it.
(Text taken from a speech I delivered to the Protection Review Conference 2014 this week)Tagged in: banks, ethics, financial, rbs, reputation, Triodos, trust, TSB
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