Correspondence: Paul Cox, Centre for Finance and Investment, University of Exeter, Rennes Drive, Exeter EX4 4ST, UK. Tel: +44 (0) 1392 263234; Fax: +44 (0) 1392 262525; e-mail: p.r.cox@exeter.ac.uk

¹is Senior Lecturer in finance at the University of Exeter. His teaching focuses on banking and financial services, and his research on institutional and retail investment selection. Prior to academia, he had a career as fund manager at an investment bank in the City of London.

Received 12 December 2006; Revised 12 December 2006.

Abstract

Motivated by evidence of low trust for financial service providers, this study turns to scholarship on trust, which suggests that trust influences individuals' risk-taking. The study asks whether a financial service provider that is highly trusted, and with saving propositions across the risk continuum, has more success with risk-based savings than risk-free savings compared to an industry average, or overall situation? A number of theoretical expectations are empirically confirmed. Findings indicate that a provider not perceived as highly trusted may have difficulty selling risk-based products. Secondly, trust appears to be a form of competitive advantage in that it encourages more assets in risk-based products on which higher fees are earned. This highlights the importance of qualitative factors both in profitability and as unique selling points, and suggests possible strategic pathways for managers when allocating scarce resources to build firm strengths.