Trust is in the Eye of the Beholder

Not only beauty but also trust is in the eye of the beholder. These days there is much attention given to restoring trust in the banking sector. The banking sector is working on this restoration of trust by having bankers take the bankers oath, investing in client centricity programs and limiting bonus payments for managers.

The fundamental question is whether this is enough. The point is that trust is gained by attribution: individuals put trust in a person or an institution and they do so while carrying their own, subjective notions. And that makes the level of trust something that is a trait not only of the object (that needs to be trustworthy) but also of the subject who attributes trust to the object. They say that beauty is in the eye of the beholder: for trust it works in the same way.

Prove that trust is like beauty

The prove that trust is in the eye of the beholder is given in the figure below (based on statistical data for the Dutch market).

level of trust that interviewed persons attribute to Banks, Big Companies and the Press, the Netherlands, 2013, source CBS (75+ bucket converted by me to median age 80)

Level of trust that interviewed persons attribute to Banks, Big Companies and the Press, the Netherlands, 2013, source CBS (75+ bucket converted by me to median age 80)

We see that the trust that is given to banks is significantly dependent on the age of the subject. As we get older, we tend to have less faith in banks. Only the Median Age = 80 bucket contains a freak data point in that, for that bucket, the level of trust makes an upward jump.

The declining level of trust across age groups is not unique for banks. The same trend can be seen for “Big Companies” (including the freak jump for the octogenarians).

The declining level of trust pattern is not universal. E.g., the level of trust that we put into “the Press” fluctuates but does not show this trend.

If we leave out the freak outcome, the declining level of trust that we attribute to banks across age is easily captured in a second-order polynomial as shown below (adjusted R2 equal to 94%).

Level of Trust attributed to Banks fitted to second-order polynomial model

Level of Trust attributed to Banks fitted to second-order polynomial model

Parting thoughts

We can conclude that trust is as much a trait of the trusted as of the person that attributes trust. Banks can take this personal characteristic of trust into account when building trust, e.g. by targeting specific age groups.

It would be interesting to know why we tend to get selectively skeptical as we get older and also whether the same pattern can be shown for other geographies. And an explanation for the freak jump of the octogenarians is also very welcome.

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Over Folpmers
Financial Risk Management consultant, manager van een FRM consulting department, bijzonder hoogleraar FRM

One Response to Trust is in the Eye of the Beholder

  1. Erik L. Daae says:

    The Netherlands Central Bank DNB has published not so long ago a survey concerning the trust we have in insurance companies, financial institutions and pension funds. Would you be so kind to divide your findings in these three categories?

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