How do you feel about the financial institutions you deal with? A report earlier this week of a survey of Wall Street financial services industry professionals, conducted by Labaton Sucharow LLP, might have you a bit leery.
The report notes, for example, that 23 percent of those polled said they’d observed or had firsthand knowledge of wrongdoing in the workplace. Twenty-nine percent believe that financial services professionals may need to engage in unethical or illegal activity in order to be successful. More than one-quarter think the compensation plans or bonus structures at their companies incentivize employees to compromise ethical standards or violate the law, and 24 percent would engage in insider trading if they could make $10 million and get away with it. Twenty-eight percent say the financial services industry does not put the interests of clients first.
Says the report, “We see a powerful and frightening pattern that threatens an already fragile marketplace.” Yikes. Now, on the heels of that, comes Thomson Reuters’ Q2 TRust Index that aims to gauge trust in the top 50 global financials. It leverages technology including its own news and social media sentiment analytics solution, Thomson Reuters News Analytics (TRNA), and its MarketPsych Indices, which provides real-time psychological analysis of news and social media.
The TRust Index, however, won’t help you decide whether or not you should trust Wall Street or executives at other financial institutions around the world with respect to what Labaton Sucharow says are the three forces that serve as safety nets for the economy: individual integrity, leadership and corporate culture. Rather, the trust metrics it employs “move in reaction to economic data and policy decisions,” especially those made by central banks, as Thomson Reuters global head of regulatory intelligence Scott McCleskey explains in a video.
In its Q1 results, released when it launched the service in May, Thomson Reuters saw “a number of encouraging indications of a recovering trust and confidence in financial institutions – as evidenced in positive media sentiment, strong analyst assessment and Q1 performance in an improving market economy, and tighter credit spreads as a measure of counterparty confidence.” At the same time, it noted a “continued wariness by investors in the sector, and potential future vulnerabilities in the controversy and governance arena suggest that we are early in the chapter on rebuilding trust in the global financial community.”
For Q2, tracking news and social media sentiment across millions of sources with its proprietary sentiment analysis technology, the Index finds that trust declined slightly for institutions in Asia, thanks likely to concerns about China’s shadow banking system and fear of a liquidity squeeze, and in the Americas. Overall, however, it saw relative trust stability for the Top 50 Global Financials (based on market capitalization).
That’s good news, given that “trust in the ﬁnancial system is the lifeblood of the markets, and its restoration is crucial to the economic recovery,” as financial executive Sallie Krawcheck says in the Q2 report. Certainly, everyone wants that – as much as everyone would like to have faith that the movers and shakers in financial services themselves merit trust.
An interesting finding to that point comes from the Q2 TRust Index, too: Corporate governance policies around responsible marketing, fair competition, and avoidance of bribery and corruption practices are more widely adopted by the Top 50 Global Financials, than the ﬁnancial sector as a whole.
That said, Wall Street at least seems to be aware that there’s more work to be done on reputation rehab. The recently released Makovsky Wall Street Reputation Study: The Road to Recovery shows that 60 percent of marketing and communication executives in the financial-services industry think it’s another five years before reputations are truly recovered.