Financial Times (FT) research suggests that the public trusts itself to look after savings and investments more than banks, building societies or independent financial advisers. Yet most respondents said that, despite their lack of trust, they had not reduced their risk levels in these bodies.
Investors can’t have it both ways. Given the contradictory responses, the one we should trust is the one respondents invest in. Lots of people seem to have resisted a “flight to safety”. What we seem to have is a generalised sense that one ought to feel at risk and say one has lost trust, whilst operationally one goes on trusting and taking risks with roughly whatever appetite one had in the first place.
But the public is not merely contradictory. It is nonsensical (or the FT’s questions were). What, after all, is someone saying when they insist they trust themselves to look after their savings? That they would rather keep the loot under the bed? Or are they saying that they trust their own advice more than anyone else’s? Wot, and not read the FT? Renounce unit trusts and pension funds (both of which make choices about where to put their client’s money)?
Most investors, said the FT, did not think they were adequately protected by the state (another surprise given how the state has backed the banks). But, reassuringly, the FT reports that it is not only savers who are sticking with the status quo:
“…. a majority of respondents in all European countries and the US have not changed the amount of risk in their portfolios, three in 10 Americans, one in four French and Germans and one in five Italians and Britons said they were now taking less risk. In Spain, three in 10 have reported that they were willing to take more risk.”
It seems, also, that most people in Britain, Germany and France have not altered their attitudes towards investing in the stock market compared with two years ago. So while some have reduced their risk, most have not, and some are already ready to up their risk levels.
The FT results reveal – if you can reveal the obvious – that the public has lost confidence in individual risk assessments and in the reputations that were once built upon sound risk management (trust and keeping promises used to be at the heart of City-type values). But what does this mean? That an institution can be less trustworthy but just as worth investing in?
So how can the PR high ground be seized without resorting to talking populist nonsense?
The best way to face the challenge is for banks and institutions to take the defence of their reputations in to their own hands (there’s a useful call to action in PR Week by Anthony Hilton: Bankers Still Live In PR-free Zone).
Moreover, if firms want to avoid the worst forms of regulation then they have to promote self-regulation as well as openness. My colleague Richard D North puts on it on a sister sister site – here and here – like this:
Instead of writing lots of rules which must be obeyed, the best regulators would name and shame firms and sectors which had not produced the sorts of voluntary schemes which offered appropriate (always optimum, not always maximum) safety. Those warnings would then reinforce the market’s tendency to produce satisfactory safety. The firms and sectors which were exposed would see custom drying up or stakeholders demand premiums.
That would really be a return to the values of “a man’s word is his bond”.
By the way, those wanting to read my more detailed account of the future of financial PR in the new era can read it here.