Trust in money men plummets

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Trust in financial institutions has collapsed.

We asked readers to rate financial advisers, sharebrokers, fund managers, mortgage brokers and insurance advisers on a scale of one to five, where five represented a high level of trust and one, that they trusted them "not at all".

Out of 1200 people who completed the survey, fewer than 1 percent of readers gave them a five.

For financial advisers, 71 percent chose an untrustworthy score of one or two.

Fund managers were trusted even less with three-quarters (75 percent) of readers scoring them a one or two.

Banks were more trusted but did not escape the backlash. Just 6 percent readers said they trusted their bank a lot, 10 percent trusted them not at all and a further 24 percent scored them a two. There were only small differences in the trust felt by men and women, but there was clear evidence that the more life experience you have, the less likely you are to trust financial services companies 82 percent of people aged 60 or over rated financial advisers negatively. That compared to 71 percent of those aged 40-59 and 54 percent of those aged 18-39.

There was also a correlation of lower trust with lower incomes sharebrokers, for example, were trusted not at all by 32% of respondents with household income below $60,000. The corresponding figure for incomes over $150,000 was 19%. However, the different income groups appeared to share a similar low opinion of insurance advisers.

But despite the devastating lack of trust in the financial services industry, its representatives appear to feel no sense of crisis. Lyn McMorran, president of the Institute of Financial Advisers said: "I do understand that people are very upset with having lost value in their investments and lost money."

Some of that was as a result of advisers investing clients with finance companies but she said not all losses could be blamed on bad advice. "Even very good advisers have had that happen to clients."

McMorran said lawmakers, regulators and the industry were a long way down the track towards lifting standards for the industry, including the qualifications needed to become one. That, she said, should remove bad advisers who had been dragging the industry into disrepute. "It has just been too easy for people to call themselves a financial adviser without having any standards or qualifications," she said.

Martin Lewington of fund manager Mercer said: "At Mercer we do believe the industry needs to address some issues and do a lot more around transparency, keeping things simple and fees."

He pointed to the recent D-rating for the New Zealand managed fund industry from global fund researcher Morningstar, which, among other things, pointed to an alarmingly low level of disclosure. He added that the nation should focus on increasing general financial literacy as well.

Geoff Brown from NZX said he was surprised at the scale of the negative response to sharebrokers but conceded that the poor performance of sharemarkets, which brokers had no control over, could have influenced people's views. He also felt sharebrokers, who he said were more regulated than financial advisers, could be tainted by attitudes to advisers who had been making bad headlines.

Although it is clear that financial advisers' reputations have been hit by their widespread recommendations of finance companies, sharebrokers by failing to protect investors from bad investments and falling markets and insurance advisers because they have never been trusted, banks stand accused of having fuelled a debt-propelled boom which has now collapsed leaving many families struggling.

Most respondents said they believed banks either shared equal responsibility (47%) with customers or greater responsibility (10%) for the debts with which families are now struggling. Just 26% blamed the borrowers alone for their debt woes.

A Bankers Association spokesman said stressful times could increase the general level of anxiety "and levels of trust can fall irrespective of the behaviour of the institutions. That may well be what is happening here. The positive thing is that banks have suffered less than other players in the financial services sector".

- © Fairfax NZ News