Sixty-eight percent of financial services firms say that their industry is now riskier or just as risky as it was in 2007, according to the “2013 Makovsky Wall Street Reputation Study,” which was conducted by Echo Research.

The Dodd-Frank Act, which was put in place three years ago as of later this month, was a major focal point of the study. And while the respondents were split on whether the increase in regulations improved, harmed or didn’t affect the reputation of the industry, opinions look to be trending toward distrust for regulations' positive effects.

In 2012, 74 percent of communications and marketing executives thought more regulation of the industry would allow reputation and trust to improve faster. But in 2013, the majority swung the other way, with 52 percent disagreeing or saying that they were not sure reforms would bolster reputation faster.

“Despite Dodd-Frank and other federal reforms, communications and marketing executives at financial services companies believe that risk has actually increased on Wall Street compared to the headier and perilous days of six years ago,” said Scott Tangney, EVP, Makovsky. “They also told us that the perception of unchecked risk is dragging on their company’s and the industry’s reputation, with a clear negative impact on profitability.”

A recent study from KPMG also found that regulatory issues are now the top concern among insurance executives, surpassing cutting costs. For that survey, 60 percent of respondents said regulatory and legislative pressures are their most significant barriers to growth, 13 percentage points higher than the previous year.

“We could be seeing a watershed change in attitude toward regulation and how it impacts reputation in the financial services industry,” said Makovsky’s Tangney. “Just one year ago, most executives were welcoming regulation as a reputation savior. Today, we are witnessing a rising ambivalence about the impact of financial reform.”

Regardless, the study revealed that the majority of companies (62 percent) have made changes in the past year to their governance policies and management to enhance oversight and prevent another financial crisis. When asked if they have worked with federal regulators to develop new rules and guidelines to prevent another crisis, 53 percent of companies reported that they had.

As a sidenote, the report also pointed out that executive compensation issues remain a major reputation risk in the financial services industry. However, while about two-thirds (65 percent) of executives remain worried about negative public reaction to executive compensation, that number is down considerably compared to 81 percent in 2012.

The survey consisted of 151 interviews with executives from companies in the financial services sector, including insurers.

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access