Despite a U.S. economic recovery from the depths of the financial crisis, nearly half of Individual Investors trusted financial services companies less in 2010 than the previous year. Edelman's second annual Trust in U.S. Financial Services Survey found that of the 46 percent of respondents whose trust levels declined, most (57%) cited financial services companies "acting in a greedy manner" and 18 percent maintained that the "industry itself has made the problems worse." Individual Investors are those with household incomes of at least $50,000 and that have at least $10,000 of investable assets.

In a separate study released last month at the World Economic Forum, the 11th annual Edelman Trust Barometer®* – which measures trust and credibility in business, government, NGOs and media among informed publics – found that trust in banks collapsed in the U.S., with banks dropping from the No. 3 spot in 2008 (71 percent) to second from the bottom in 2011 (25 percent), tied with financial services.

"The way people perceive companies has changed significantly since the pre-crisis era, and the reputations of financial services companies in the U.S. have been some of the hardest hit," said Matthew J. Harrington, CEO, Edelman U.S. "The decline in trust in these institutions – even as the financial markets were recovering – underscores the long road back they must travel to re-earn the lost trust."

Another survey finding further illustrated the falloff in the decline in trust. Half of the respondents said they need help managing their money more effectively – assuming they can find a firm they trust and respect – but six in 10 are uncertain of the value that large financial services firms can provide in managing their money.

When considering the factors most important to the overall reputation of a financial services company, surveyed investors ranked "honest communication" (91%) and "open and transparent business practices" (84%) at the top. Traditional marketing mix tactics – "fair and competitive prices" (75%), "available customer service" (74%) and "website with easy financial transactions" (62%) – ranked lower, as did "consistent product delivery" (75%).

"While content-rich websites and fast and responsive customer service are, no doubt, important, they are 'table stakes' to investors," said Jeff Zilka, general manager, financial communications, Edelman. "What consumers are hungering for, and what financial services companies must deliver if they are to restore their customers' trust, is honest communication and the reality of open and transparent business practices."

Community and Regional Banks Seen as Most Trusted

Only 49 percent of respondents said they trust financial institutions in general. Community or regional banks scored highest in the survey (67%), with mutual fund companies second at 55 percent. Life insurance companies (42%) and property/casualty insurers (37%) ranked in the middle of the pack but well below the 50 percent level, and investment banks (35%) and private equity firms (32%) were least trusted.

A silver lining does exist for larger financial firms, at least among so-called "Entry-Level Affluents" – a sub-set of the survey with an annual income of more than $150,000 and investments of more than $100,000. They have significantly higher trust in both large, national banks (52%) and brokerage firms (49%), than the overall Individual Investor survey population (45% percent and 43% respectively).

Client-Facing Professionals Seen as Most Credible Sources of Information from Financial Services Firms

Respondents viewed the client-facing professionals they deal with – brokers, advisors, agents and bankers – as the most credible sources of information (37%) from financial services firms, with portfolio managers seen as the second most credible (15%).

"While Individual Investors surveyed in the Trust in U.S. Financial Services study may not find CEOs of financial services firms to be among the most credible sources of information, CEOs are still critical representatives and culture-setters for their firms," Zilka said. "What this means is C-Suite executives must dig in and externally communicate the values of their institutions while internally setting high standards for honest communication and transparent business practices."

Respondents Say Still More Regulation Is Needed

Fifty-six percent of those surveyed believe that financial institutions need to be regulated more, even after the passage in July 2010 of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Additionally, two-of-three respondents believe Dodd-Frank doesn't cover some problems, and 65 percent believe government agencies, financial services companies and Congress must work together to address the problems facing the financial services industry.