Financial services firms 'must be ethical'

Financial services firms have been warned customers are often willing to switch if they are found to be involved in 'unethical' behaviour.

Companies operating in the UK financial services sector have been warned they need to avoid unethical behaviour - or risk losing custom to their rivals.

Research by the Social Market Foundation (SMF) has found 64 per cent of consumers would switch providers if they found the company they had accounts with was found to be involved in bad business behaviour.

In addition to this, 41 per cent said they would happily switch to a provider that had a specifically ethical approach to its business.

Ownership structures are one of the factors in the findings, with mutuals being listed by 79 per cent of consumers as the sort of institutions they would be most likely to put their trust in.

Companies may consider that the way they conduct their tax affairs could be one of the issues that sway consumer choices. For this reason, those seeking tax jobs may find they can contribute to helping a financial business ensure it is operating in an ethical manner to avoid the negative publicity that has affected multinationals in other sectors, like Google, Amazon and Starbucks.

Commenting on the findings, report author and SMF economist Katie Evans said: “It is clear that there is a significant lack of trust in much of the financial sector. Consumers don’t believe all financial services firms are involved in negative practices, but they struggle to identify companies who they think are more likely to meet their expectations.”

At the moment a limited number of financial services firms have specifically ethical policies in place.

One good example of a bank that does is the Co-operative Bank, which instigated an ethical investment policy in 1992 that aimed to ensure it was doing business in areas its customer base wanted it to steer clear of.

This has meant the bank has turned down large amounts of business with companies involved in areas like the arms trade, activities that cause pollution, the tobacco industry and genetic modification.

Last year saw the latest revision of the policy, which was based on a survey of account holders.

Other 'ethical' banks include online bank Triodos, which aims to restrict its business to include only clients that are good for the environment.