Trust and confidence in financial services: a strategic challenge
| DOI | https://doi.org/10.1108/EUM0000000007304 |
| Date | 01 December 2005 |
| Pages | 333-346 |
| Published date | 01 December 2005 |
| Author | David T. Llewellyn |
| Subject Matter | Accounting & finance |
Trust and confidence in financial services: a
strategic challenge
David T Llewellyn
Professor of Money & Banking, Loughborough University and President, SUERF: The European
Money and Finance Forum
David T Llewellyn is Professor of Money
and Banking at Loughborough University
and President of SUERF: The European
Money and Finance Forum. He has worked
previously at Unilever (Rotterdam), HM
Treasury (London), Nottingham University,
and the International Monetary Fund
(Washington). Between 1994 and 2000 he
was a Public Interest Director of the Per-
sonal Investment Authority. He has served
as a consultant to regulatory agencies in
several countries and is currently a
member of an IMF Advisory Group on gov-
ernance arrangements in financial super-
visory agencies.
ABSTRACT
KEYWORDS: Trust, financial services, Reg-
ulation
The purpose of the paper is to offer an analyti-
cal framework for the Treating Customers
Fairly initiative of the Financial Services
Authority. The TCF agenda is set in the con-
text of theory of consumer behaviour. The cen-
tral theme is that retail financial transactions
are fundamentally different from most other eco-
nomic transactions made by retail consumers and
to an extent that means the consumer needs to
have Trust and Confidence in the products pur-
chased and the suppliers of financial products
and services. A distinction is made between dif-
ferent types of products and also between the
degree of need for Trust and the extent to
which the consumer actually does have Trust
and Confidence when making decisions. The
inculcation of Trust and Confidence needs to
become a central strategic issue in financial
firms and can be addressed by initiatives of col-
lective self regulation rather than more prescrip-
tive regulation.
INTRODUCTION AND CONTEXT
Two major issues related to the regulation
of the retail financial services industry have
been discussed at length over the past two
years: corporate governance in mutuals,
and the Treating Customers Fairly (TCF)
initiative. With respect to governance and
life mutuals, a great deal is owed to Paul
Myners for an excellent analysis and survey
of issues and a set of very clear and credible
recommendations (Myners, 2004). There is
a link between these two areas of debate in
that corporate governance arrangements
potentially contribute to Trust and Confi-
dence in financial firms and may also con-
tribute specifically to the TCF agenda. In
the final analysis, it is the Board of a finan-
cial institution that must set broad strategy,
ethos and the standards of dealing with
consumers.
The objective of this article is to set the
TCF agenda in the context of theory of
consumer behaviour. A different perspec-
tive and an analytical framework are
offered based on the central issue of Trust
and Confidence in retail financial services.
The particular focus is on the consumer’s
viewpoint and especially with respect to
Page 333
Journal of Financial Regulation and Compliance Volume 13 Number 4
Journal of Financial Regulation
and Compliance, Vol. 13, No. 4,
2005, pp. 333–000
#Emerald Group Publishing
Limited, 1358–1988
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