Consumers Seek Safety, Stability

CU360
August 20, 2009 | COMMENTS

Americans do not trust their financial institutions these days—except for their own. In Gallup polling conducted in May 2009 and reported in Brandweek, only 20% of respondents have a “great deal” or “quite a lot” of trust in today's financial institutions. Thirty-five percent said they have “very little trust” in them.

However, when respondents were asked how much confidence they have in the “bank or financial institution where you do most of your business,” the “great deal”/ “quite a lot” tally jumped to 63% and the “very little” figure fell to 10%. In Gallup 's polling on the topic in April 2009, 7% said they were likely to switch to another financial institution in the next three months, versus 75% not at all likely to do so. And while 11% said they planned to reduce the amount of money they keep at their primary financial institution, 30% intended to increase their deposits during that period.

Recent Gallup polling gives a clue as to why so many consumers would be inclined to increase their deposits at a time of economic volatility. When asked to pick the “best long-term investment” from a list of options, 34% of respondents selected savings accounts/CDs, putting that choice a percentage point ahead of real estate and far ahead of stocks/mutual funds (15%) and bonds (12%).

As might be expected, the poll's lower-income respondents were especially drawn to the safe-and-familiar deposits products. Even among those in the $75,000-plus income level, savings accounts/CDs tied with stocks/mutual funds and outscored bonds (11%), lagging only behind real estate (39%).

A separate poll by J.D. Power and Associates, also released in May, looked at factors that influence consumers' choice of a financial institution. Service is often a decisive one. Among respondents who've switched financial institutions, “27% attributed their decision to either having had a previous good service experience with their new institution, or receiving a positive recommendation about the institution,” says the research firm's summary of the findings. “In contrast, better interest rates, lower fees, and perceptions of the institutions involvement in the local community were notably less important selection drivers among consumers who switched.”

And then there are the factors which lead a consumer to avoid a particular institution. The J.D. Power survey found 30% of respondents “deliberately excluded an institution from consideration due to perceived financial instability, the institution's bad reputation, or its questionable ethics,” according to the survey summary.