Once lost, a reputation is hard to regain, and its costing financial services companies hundreds of millions in sales.
Even with a rebounding economy and a surging stock market, 44% of marketing and communications managers at financial firms say that their companies have lost at least 5% of their business over the last year because of reputation issues, according to the Makovsky Wall Street Reputation Study released Wednesday. All told, those surveyed reported an average sales loss of 9% over the last 12 months.
Almost five years later, the financial crisis has transformed into a reputation crisis for financial services firms and there is still a long road back to recovery, Makovsky executive vice president Scott Tangney said in a statement. Only about one quarter of financial services firms told us that their corporate reputation has already been completely restored to pre-financial crisis levels.
Of the 151 managers and executives queried in the online survey, most (61%) attributed their firms bad reputation to the publics general disdain for the financial services industry. To the public, the excesses of one firm are viewed as representative of the industry as a whole. Other factors were poor crisis management (52%) as well as subprime mortgages and liquidity and capital problems.
Financial services companies now see the number one reputation challenge for the next year to be differentiating themselves from competitors saddled with significant negative perception issues, said Tangney.
Though a survey of attitudes rather than an analysis of hard internal data, the study has a sound empirical basis, Tangney says,
These people see the numbers because they have to manage them, said Tangney. Theyre on the frontlines, saying How are we going to increase sales? These folks are in the know in terms of what the issues are and how much business they are losing because of those issues.
And they dont expect to recover their good names anytime soon. Sixty percent said it could take up to five more years before their firms reputation returns to where it was before the market crash.
Among survey participants, customer satisfaction (82%), financial performance and/or shareholder value (71%), and having a strong brand (69%) are the chief factors influencing their corporate reputations.
The study, which was conducted in March 2013 by Echo Research, found that investor relations (93%) and corporate advertising (92%) are the most effective means of counteracting negative perceptions.
But many of those queried felt they were not being given the tools to fight these negative perceptions, with only 18% rating their companys reputation restoration efforts very effective.
Theres a lack of commitment by management to rebuild reputation, so those in the wealth management industry are facing more of a wall internally, said Tangney. Theyre not getting that internal commitment, that internal focus.