A significant number of Americans have less confidence in the financial-services industry today than they did in the immediate aftermath of the Wall Street meltdown, according to a survey released today by AlixPartners, the global business-advisory firm.
Approximately 36% of respondents are more distrusting of banks than they were at this point a year ago, despite the uptick in the economy and the significant reputational-building efforts by the financial-services industry and Washington, including proposed financial-reform legislation.
"Though the economy is starting to recover and some pockets of retail investors are gradually returning to the market, it's clear that the entire financial-services industry still has a long way to go to recover from the damaging blows to its reputation over the past 18 months," said Pierre Buhler, a managing director at AlixPartners and head of the firm's Financial Services practice.
The level of overall distrust in financial institutions is driving Americans to action. As a result of their perceptions of financial institutions, 33% of Americans report having changed their investing behavior, political leanings or related behaviors. For example, 43% said they will be changing their political vote and 31% are changing or dropping their current bank relationship.
"Continued distrust of banks among Americans threatens to have a significant impact on both the investing market and the upcoming mid-term elections," said Buhler. "It will also likely affect the shape of regulatory reform, including how the legislation about to be finalized in Congress is ultimately implemented by the various oversight bodies, both existing ones and those being proposed."
The poll followed up on a September 2009 AlixPartners survey on Americans' investing behaviors. In this new survey, 21% of Americans who had previously invested in stocks or mutual funds report having no intention of investing in the next three years. This represents a five-percentage-point improvement from September 2009, but still leaves approximately one out of five previous investors who plan to stay out of the market for some time.
The recent poll also indicates that investor demographics seem to be changing. At this point, wealthier investors and men are twice as likely to have returned to the market. Some 25% of respondents with annual income levels greater than $75,000 say they have increased their investing since the beginning of the year. This contrasts with investors with household incomes of under $75,000 annually; only 12% of this group reports increasing the level of their investing over the same period. In addition, twice as many men as women have increased investing in 2010 (22% versus 11%).
The survey also found an uptick in the percentage of investors who plan to seek professional investment advice. According to the poll, 67% of Americans who previously invested plan to get professional advice on their future investments. This represents an 8% increase from the September 2009 survey findings.
"Financial-services institutions will face challenges for some time. In this environment, they should be promoting product and service strategies that attract and retain customers, creating infrastructure flexibility to meet today's changing regulatory requirements and protect their margins, while remaining competitive and keeping customer relationships strong," said Will Harris, a director in AlixPartners' Financial Services practice.