1 Client mistrust of advisers , products and markets by Keith Redhead

The purpose of this paper is to show that the problem of trust relates to all three levels of financial engagement by a retail investor. (1) Engagement with the adviser who advises on financial products. (2) Engagement with the financial institutions that produce the financial products. (3) Engagement with the stock markets in which the financial products are invested. It is proposed that these three levels could be factors in a three-factor model analogous to multi-factor forms of the capital asset pricing model. At each level there are reasons for mistrust arising from perceptions of risk. This mistrust arises from the clients, the agencies with which the clients engage, and the nature of the engagement. The perceptions of risk, and the corresponding degrees of trust, are influenced by many factors. The degrees of trust are unlikely to be constant, and may even be cyclical. Stock market performance is one influence on trust. Also trust influences levels of investment, and thereby stock market performance. The relationship exhibits reflexivity. There appears to be a role for marketing in influencing levels of public trust; not only in investment products but also in advisers and markets.