Building investor trust in the financial industry an uphill climb

TRUST is an intangible, almost ephemeral thing. It lends confidence and serves as the bedrock upon which institutions and the entire financial industry is built. Without it, the edifice collapses. Trust underpins almost all financial transactions, from advisory to the valuation of assets and the choice of counterparties in a contract.

In 2008, Lehman Brothers' collapse and the unwinding of transactions built on subprime credit gutted faith in financial institutions and advisory. Since then regulators in many markets including Singapore have tightened market conduct rules.

There are strict rules, for instance, on the sale of financial products to elderly and vulnerable clients. Advisers have to conduct a "customer knowledge assessment'' as part of the "know your customer'' process. One would expect that trust in the financial industry would trend up.