It's a year marked by the failure of four banks, including the largest collapse since Washington Mutual in 2008. So, it's hardly surprising that customers exhibit less trust in banks. The surge in mortgage rates to a two-decade peak didn't help. Nor did the Federal Reserve implementing 11 interest rate hikes within 17 months to combat inflation.
For the fourth straight year, most banks have found themselves near the bottom of the list in average trust ratings, trailing seven other business categories in the IBD Most Trusted Financial Companies survey.
IBD's fourth annual list of the Most Trusted Financial Companies is based on a June-July survey. Thousands of people rated their financial service providers on the trust attributes that consumers said were most important.
Read our overview story, IBD's Fourth Annual Survey Of The Most Trusted Financial Companies.
Our sister company, MarketWatch, is co-branding the report for a second year.
For the Most Trusted Financial Companies in 2023, Investor's Business Daily asked 7,597 survey participants about how they judged the financial soundness of the companies they do business with, along with six other trust attributes. We also added online banks to our survey this year.
The survey was conducted by IBD's polling partner, TechnoMetrica Market Intelligence.
Besides banks, the other business categories surveyed were auto insurance, ETF/fund companies, home insurance, online brokers, credit card issuers, wealth management firms and life insurance providers.
Banks Battle For Trust Among Financial Firms
According to Herman Brodie, author of "The Trust Mandate" and an expert in behavioral finance research, perceptions of all banks and of bankers largely rise and fall together with what he calls "system trust" and "role trust."
System trust refers to the overall trust that people have in the financial system or the broader industry. Role trust, on the other hand, is the trust that people place in specific financial institutions, such as banks or investment firms, based on their roles within the system.
Both system trust and role trust are crucial for maintaining a healthy and functional financial ecosystem. They contribute to establishing a foundation of trust that encourages individuals to engage with financial institutions and participate in broader economic activities.
"Perceptions of all banks and of bankers largely rise and fall together from the first two," he said.
To gain a competitive advantage, though, financial professionals must concentrate on interpersonal trust.
3 Most Trusted Banks
| Company | Overall rating | Soundness | Quality | Privacy | Ethics | Customer service | Prices | Sensitivity to customer needs | |
|---|---|---|---|---|---|---|---|---|---|
| Schwab Bank | 86.5 | 85.8 | 89.6 | 87.5 | 86.9 | 87.2 | 85.6 | 81.5 | |
| U.S. Bank | 76 | 83 | 77.4 | 82.5 | 76.5 | 70.4 | 67.1 | 67 | |
| Chime | 75.7 | 76.2 | 79.4 | 76.2 | 76.6 | 75.7 | 80.3 | 62.7 |
Charles Schwab Bank, the 12th-largest bank in the U.S. by deposits, took top honors in trust among 10 banks in our survey, with an overall trust rating of 86.5. And despite some concerns about Schwab's financial soundness after the collapse of Silicon Valley Bank, Charles Schwab Bank was the fifth-most-trusted financial company in the U.S. across all eight business categories.
Charles Schwab Bank is affiliated with the largest publicly traded brokerage company in the U.S., Charles Schwab Corp., and Charles Schwab Investment Advisory. Schwab has 1.7 million banking accounts and $7.38 trillion in client assets.
Schwab family companies took four of the top-10 spots in this year's trust index.
Within the banking category, Schwab Bank ranked highest overall. U.S. Bank and Chime followed on the list of the three best banks in customer trust. Schwab Bank topped the category list for best score in all seven attributes: soundness, quality of products/services, privacy and security of personal data, ethical business practices and values, customer service, prices, and sensitivity to customer needs in the current economic and financial climate.
Trust Is 'Earned Over A Lifetime'
"One of our guiding principles is that trust is everything and earned over a lifetime, and is lost in an instant," said Rick Wurster, president of Charles Schwab Corp., in an interview with IBD contributor Adam Shell.
"As I think about our business, trust really is everything. We're holding our client's life savings. ... They need to be able to know that we're going to ... take care of that money, that we're going to have their best interests in mind and that their assets are safe and secure. So, we would not be in business without trust and relationships."
Read Our Category Stories On The 2023 Most Trusted Financial Companies In Investing, Insurance, Credit Cards And Banking
Mike Peterson, director of public relations at Charles Schwab, elaborated further in an email that Schwab Bank's role is to support its brokerage clients. "Most of our bank customers were Schwab brokerage customers first, and they appreciate the benefits of brokerage and banking services being integrated with convenient access to features like checking accounts, CDs, trust services and convenient money transfers," he said.
He said many of the trust factors that Schwab Bank scored high on in the bank category reflect the experience the company strives to offer all its clients. "We believe their trust in us as a brokerage firm led to their trust in us for banking services," said Peterson.
Peterson noted too that Schwab Bank, for five years in a row, has received the highest score in the checking segment of the J.D. Power U.S. Direct Banking Satisfaction Study, which measures overall satisfaction with branchless banks.
Battle For Trust Heightened By Bank Failures
Regarding the financially sound/secure attribute — which is new to the IBD survey this year — Peterson said it's difficult to offer specifics without context. "Most important, our business is extremely robust," he said. "It is important to start with the fact that Schwab continues to be in a very strong position, competitively and financially.
"Schwab's performance against client metrics remains strong. In July, new brokerage accounts increased 9% year-over-year, and year-to-date core net new assets in our Schwab franchise grew double digits over last year. Likewise, clients are bringing assets into our advice solutions at record levels. The corporation maintains an adjusted pretax profit margin above 40%."
What's more, Peterson noted that Schwab was built to serve clients through all economic environments. "Our broad base of high-quality clients is well-protected," he said. "Clients benefit from their brokerage assets being covered by SIPC insurance, and bank deposit accounts are protected by FDIC insurance up to FDIC limits. Over 80% of client cash held at Charles Schwab Bank is insured dollar-for-dollar by the FDIC. That percentage is among the highest of the top 100 U.S. banks."
Lastly, he said, "Our company is devoted to our clients' success, and they have remained highly loyal and supportive. That's our true north and our most important measure of success."
Customers Eye Trust And Transparency
One Schwab Bank customer participating in the survey offered this perspective by email.
"Trustworthiness," said customer Paul Butuc. "They are (trustworthy). Fees exist, they do need to make money, and fees are transparent."
As for financial soundness, Butuc notes that Schwab Bank was hit when SVB collapsed and triggered turmoil among midsize banks. (Schwab shares fell this spring along with other financial firms that had massive bond holdings of longer maturities.) But, Butuc adds, it's still profitable from its brokerage division. "I do expect they won't be able to increase fast and easy their interest on savings and interest on checking accounts. ... But I also don't fear my money going missing."
With respect to the quality of products and services, Butuc says Schwab Bank is among the best. "They keep adding improvements, good offerings and services," he said. And, with respect to customer service, Butuc said working with Schwab Bank is a "great experience."
Another Schwab Bank customer who participated in the survey shared Butuc's point of view. "I have a very positive sentiment towards Schwab in (the seven areas of trust)," Sam Roll said in an email.
"One aspect that stands out to me about Schwab Bank is the customer service," he said. "There are multiple options in terms of contact with Schwab for customer service."
Roll's preference is to contact Schwab via phone as he finds it "a pleasurable experience."
He noted, for instance, that in lieu of obnoxious hold music, financial news clips are played. "This is a simple nuance that makes the whole experience a bit more bearable," said Roll.
Additionally, Roll noted that each customer service member "I have spoken with emits personability and utilizes utmost clarity in helping me solve whatever need I have."
Schwab's service reflects a core focus on the customer through developing trust and a stress on customer satisfaction, he said.
Enter The Online Banks
New to the IBD Most Trusted Financial Companies ranking is Chime. San Francisco-based Chime is a financial technology company that offers banking services through an app.
Within the bank category, Chime placed third overall, and came in second for quality, customer service, and prices.
In the overall trust index ranking for all types of companies in the survey, Chime was in 38th place. Only the top 30 are recognized as Most Trusted Financial Companies overall.
Chime partners with two FDIC-insured banks to provide banking services to offer checking and savings accounts, debit cards and other financial services. It's best known for offering low-cost accounts with no monthly maintenance fees or overdraft fees.
"Chime was founded on the idea that everyday banking and payment services should be helpful, transparent and fair," a Chime spokesperson said in emailed comments. "As the No. 1 most-loved banking app and one of the most downloaded banking apps, the trust of our members is our top priority."
None of the banks in the top three slots last year made it to this year's three best banks in trust. Capital One Bank, Chase and Bank of America finished Nos. 1, 2 and 3 in trust, respectively, on 2022's banking category list.
(Read all our 2023 Most Trusted Financial Companies content.)
