The good news is that the public’s trust in financial service professionals slipped only slightly last year, but the bad news is that financial services is the least trusted of 15 sectors worldwide, according to the 2020 Edelman Trust Barometer.
The financial services sector was also the only one considered “neutral,” with 57% saying they trusted the sector. All the other sectors, which included such segments as energy, technology, fashion and healthcare, scored at least a 63%, placing them in the “trust” category.
So, the good news is that although trust dropped for all the sectors last year, financial services was among the least with a one percentage point drop.
This year’s report is Edelman Research’s 20th annual survey, which polled more than 34,000 people online in 28 markets worldwide late last year.
Given the low trust in the financial sector, it might not be surprising that capitalism does not fare well overall. A majority worldwide (56%) said they feel that “capitalism as it exists today does more harm than good in the world.”
Nearly half (48%) said that “the system is failing me,” a three percentage point increase year-over-year. Another 34% said they weren’t sure, a two percentage point drop. And only 18% said “the system is working for me,” also a two percentage point drop.
Four dimensions were examined to determine whether respondents believed the system is failing them, according to the poll methodology:
- A sense of injustice stemming from the perception that society’s elites have co-opted the system to their own advantage at the expense of regular people.
- A lack of hope that the future will be better for you and your family.
- A lack of confidence in the leaders of societal institutions to solve the country’s problems.
- A desire for forceful reformers in positions of power that are capable of bring about much-needed change.
A key driver of distrust is a reaction to unethical behavior, according to Edelman.
“The 2020 Edelman Trust Barometer reveals that despite a strong global economy and near full employment, none of the four societal institutions that the study measures — government, business, NGOs and media — is trusted,” Edelman said in its report. “The cause of this paradox can be found in people’s fears about the future and their role in it, which are a wake-up call for our institutions to embrace a new way of effectively building trust: balancing competence with ethical behavior.”
Add to that a growing sense of income inequality.
“Since Edelman began measuring trust 20 years ago, it has been spurred by economic growth,” the report said. “This continues in Asia and the Middle East, but not in developed markets, where income inequality is now the more important factor. A majority of respondents in every developed market do not believe they will be better off in five years’ time, and more than half of respondents globally believe that capitalism in its current form is now doing more harm than good in the world.”
Nearly eight in 10 respondents (78%) believe that “elites are getting richer while regular people struggle to pay their bills.”
CEO: "People Are Scared"
Edelman CEO Richard Edelman discussed the survey this week at the World Economic Forum in Davos, Switzerland.
Although the growing interest in socialism has been attributed to young people, Edelman said that the reaction against capitalism was across age groups. Fifty-three percent of respondents over 55; 57% of the 18-to-34 age group and 59% of people ages 35 to 54 said capitalism does more harm than good.
"The essential truth is: people are scared," Edelman said. "Their fears are overcoming their hopes."
Although distrust of institutions exists across all the economic classes, wealthier, more educated and frequent consumers of news that Edelman calls the “informed public” remain far more trusting of every institution than the mass population. Less than half of the mass population trusts institutions to behave ethically.
All strata of the public share a concern about their jobs.
“Against the backdrop of growing cynicism around capitalism and the fairness of our current economic systems are deep-seated fears about the future,” the report said. “Specifically, 83 percent of employees say they fear losing their job, attributing it to the gig economy, a looming recession, a lack of skills, cheaper foreign competitors, immigrants who will work for less, automation or jobs being moved to other countries.”
Trust = Competence + Ethics
Edelman Research identified two attributes of trust elements – competence and ethics. After focusing on the trust capital of companies in the latest survey, Edelman found one attribute counted far more than the other.
“After tracking trust in 40 global companies over the past year,” the report said, “we learned that ethical attributes drive 76 percent of the trust capital of organizations, while competence drives 24 percent.”
Before the forum, CEO Edelman said he planned to use the research “a rallying cry for businesses to enact change” when presenting the report in Davos.
He said the Business Roundtable’s assertion that corporations should have a purpose greater than shareholder value was “damn important” and wanted to see more tangible action from business leaders.
“That’s what I’m going to tell them," Edelman said. "That’s my close. The time for talk is over.”
The poll’s report laid out the four existential issues of the next decade: income inequality, sustainability, information quality and artificial intelligence, which “will require higher levels of cooperation among our institutions; no single entity can take on these complex challenges alone.”
The public is growing impatient and losing hope, the report concluded: “Doubt that they are reaping their fair share of the benefits of capitalism is undermining people’s belief that our institutions are willing and able change agents or are working to ensure a better future for all.”
Steven A. Morelli is editor-in-chief for AdvisorNews. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at email@example.com.
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