Invisible Brand

As Billy Joel sang, "it's a matter of trust." Trust certainly matters in financial services, but is our understanding of it a bit simplistic? Lucian Camp identifies five different kinds of trust - and argues that after all the challenges of recent years, some are in much better health today than others.

Trust. Loss of trust. Crisis of trust. Rebuilding trust. Earning trust. God, if I had a pound for every time someone’s said something about trust in financial services over the last couple of years, I could have afforded to rescue HBOS and RBS myself.

I expect you feel the same way. So your first reaction on discovering that this is yet another piece on the subject may be less than ecstatic.

But hang on. I think that give or take some profs at the University of Nottingham, who I think are onto something similar, I have a new angle on the subject. Ladies and gentlemen, I respectfully propose that talking about “trust” as a single, homogeneous concept makes no sense; that in fact we can identify as many as five distinct and discrete kinds of trust that we may have, or not have, in our financial institutions; and that whenever we want to say something about trust we owe it to ourselves and whomever we’re addressing to make it clear which of the five we’re talking about.

What’s more, I also respectfully intend to demonstrate that the current levels of these five different types of trust vary somewhat between one and another; that on the whole the levels are a bit less dire than you might imagine; and, perhaps surprisingly, that the problems that do exist are only to a limited extent a consequence of the recent financial crisis, most of them having arisen before it began.

The first is the core BASIC TRUST that has to exist in order for us to be willing to have anything to do with the industry at all: the trust that we won’t lose all our money. Very few pundits or fortune-tellers predicted that it would be the banks of the tiny republic of Iceland who would shake this kind of trust most damagingly, but rather more did go on to recognise that in fact, the Government never had any option but to guarantee the money of savers in these and almost all other flaky institutions, with the result that despite some very challenging moments – the run on Northern Rock comes immediately to mind – Basic Trust has largely survived.

The second is what we might call FUNCTIONAL TRUST, the trust that the industry’s core services will more or less work for us as we expect. We will usually be able to draw cash from ATMs. Cheque payments will clear. When we buy insurance policies, cover will be provided and we will be sent documents that prove it. If we invest in an ISA, we won’t be pursued by grasping taxmen claiming that mistakes have been made in the product design and tax exemption isn’t available. On the whole, Functional Trust still exists too, although everyone has their own stories of times when it turned out to be misplaced.

The third level is PERSONAL TRUST – trust in the ability of the industry to deal with our personal and individual needs. OK, a bank can enable all its customers, including me, to get cash from an ATM: but what happens when, say, I want to move some money from one specific account to another? Will I be able to get through to the call centre? Will I be able to make myself understood? And, most importantly, will the money actually turn up where I want it a few days later? Similarly, a home insurance provider can make it easy for anyone to buy a policy on the phone or internet, but what will happen when, say, squirrels eat my electrical wiring and I have to make a claim?

It seems to me that our Personal Trust in the industry’s ability to deal with us as individuals has been declining inexorably for many years, and continues to do so. We know the call centre won’t respond for twenty minutes, won’t understand what we want and won’t do what they said. We know that the insurance company will make it as easy as possible to buy their cover, but as hard as possible to make a claim. And we know that every year in every way, it’ll go on getting a bit worse.

Then there’s the fourth level - the one I must admit that I tend to have in mind when I refer to “trust” generically. This is what you might call BEST INTENTIONS TRUST – the trust that the industry can be relied on to act in its customers’ best interests, to do the right thing for them and (not quite the same) not to do the wrong thing.

Don’t make me laugh. Despite what firms’ TCF research may show, this is the kind of trust that too many providers have played their own part in systematically annihilating over a long period of time. All those mis-selling scandals, all those rip-off products, all that criminal overcharging, all that doling-out of unlimited credit on the back of fraudulent applications to people who could never hope to repay it – all of this has combined to leave most people in no doubt whatsoever that if you equipped many firms with some bits of wood, some nails and a hammer, their immediate and overwhelming response would be to box up their customers like the proverbial kipper.

Again, the weary despair that we feel in the parts of our brains where this form of trust used to reside has little to do with recent events. We suspect – rightly, I fear – that in their attempts to repair their devastated balance sheets some institutions may treat their retail customers even more rapaciously in the future than they have in the past. But the damage was largely done before the credit was crunched.

And then finally there’s the fifth level – a rather obscure and perverse variant which I’m choosing to call SELF-PRESERVATION TRUST. By this, I mean our trust that in its devious, untrustworthy way the industry does at least know what it’s doing, acts effectively in its own self-interest and so is able to go from strength to strength and from record profit to record profit – in the process, making a huge contribution in tax payments to the Exchequer and maintaining financial services as one of the few great remaining British business success stories.

Here, finally, we have a kind of trust which has clearly been obliterated by the current crisis. It turns out that huge swathes of the industry have been just as credulous and naïve as its customers: in scenes reminiscent of those medieval carvings where snakes start eating their own tails, the industry has actually ripped itself off to the brink of extinction.

In summary, then, we have five kinds of trust – two in reasonably healthy condition, three much less so, but only one primarily influenced by current events.

Is this good or bad? Perhaps a bit of both. It’s good that not all forms of trust are equally damaged, and maybe good that the credit crunch and the current crisis have done less harm than some people may assume. But on the other side of the coin, there are disappointing and depressing conclusions too. Too many financial firms haven’t needed a huge global crisis to atomise huge chunks of their customers’ trust in them – it’s been part of their standard operating procedure for years.