Americans have a surprising amount of trust in their mutual fund providers, according to a recent survey by the public relations firm Edelman. As part of the survey, entitled the U.S. Financial Services Trust Barometer, 59 percent of respondents said they trust fund companies.
Overall, the survey found that fund companies are the second-most trusted financial institution. Community and regional banks, which had the trust of 79 percent of respondents, came in first. In the survey, respondents answered on a scale from 1 to 9, with 1 meaning that they had no trust at all in a particular institution. Scores of 6 and above qualified as trust.
Jeff Zilka, the general manager of financial communications at Edelman, attributes local banks' dominance in the rankings to their ubiquity in the lives of most Americans. “We think there’s an element of ‘familiarity breeds not contempt but affection.’ ” he says. "In the same way that studies will show that individuals hate Congress but like their congressman, we think they like the community and regional banks."
As for fund providers' popularity, Zilka says customers are increasingly putting a premium on transparency and communication. "They value frequent and honest communication. They value good customer service. Most of the large mutual fund companies do that [very] well," he says.
Meanwhile, private equity firms enjoyed the least amount of trust (29 percent), followed by investment banks (32 percent) and brokerage firms (41 percent). Large national banks, property insurance companies, and life insurance companies all had trust levels of between 46 and 52 percent.
Zilka says the relative disdain that Americans have for private equity firms and investment banks helped make fund providers look better to the respondents. "Look at the competitive set. In terms of a rogues' gallery, you're comparing them to large national banks, investment banks, private equity firms," he says.
Younger respondents had particularly high levels of trust. In fact, respondents between the ages of 25 and 34 were more trusting of every single financial institution mentioned in the survey than were their older counterparts.
Overall, though, the survey found a surprising amount of faith in the nation's financial institutions among people of all ages, even in the wake of the financial industry's catastrophic meltdown during the recession.
But trust is hardly the same thing as complete satisfaction. Not surprisingly, 93 percent of respondents said there are problems that need to be addressed in the financial services industry. And 63 percent said financial institutions should be more heavily regulated.
The U.S. Financial Services Trust Barometer was a survey of 500 Americans. All of them are college educated and at least 25 years old. All respondents also have high household incomes (in the top 25 percent by age) and regularly read or watch the news. As such, it's quite possible that their opinions differ substantially from those of the broader public.
The survey, which was released for the first time this year, is an offshoot of Edelman's popular global trust barometer, which each year looks at how respondents in the United States and abroad view various types of businesses.
Corrected on 02/16/10: An earlier version of this article quoted Jeff Zilka as saying, “We think there’s an element of ‘familiarity breeds not content but affection.’ ” The actual quotation is “We think there’s an element of ‘familiarity breeds not contempt but affection.’ ”