The noise has beendeafening. Iconic Wall Street brands are falling over with a resounding thudlike billion dollar dominoes-Bear Stearns, Lehman Brothers, AIG, plus Fannieand Freddie. Amid the rubble is billions of dollars in lost brand equity, ashattering of trust that threatens to attach itself to the entire industry.Even the perceptions of those companies that have been relatively unscathed bythe sub-prime mortgage debacle are likely to be tarnished.
Financial brands ofmany types are feeling the pain. The two remaining investment bank firms,Goldman Sachs and Morgan Stanley, have scurried for the safety of commercialbank status, but in the process have been tainted as well. All brands depend inlarge part on an emotional bond of trust with their market, investment firms,banks, and brokerages more so than most. When a company breaks that trust(anybody remember accounting giant Arthur Andersen?) it can bring it crashingdown. But when an entire industry is called into question, every company in itpays the price.
Bullish onAmerica? More like Sheepish.
Part of the flurryof action in the coming weeks and months will include a rush to begin shoringup surviving brands-watch as messages shift from performance-based boasts tosecurity-based reassurances, with many likely to stress adherence toconservative fundamentals that have been proven over time and have “always”formed the backbone of their philosophy. If it sounds like a lot of spin iscoming our way, it’s because it is.
A recent email toING Direct account holders serves as an early example:
“We will continue to stress the right way to achieve home ownership -buying only as much house as you can afford and paying off your mortgage asfast as possible. In return for good credit and prioritizing home investment,ING DIRECT mortgage Customers are rewarded with exceptional rates and atransparent, direct administration process.”
Feel reassured?Maybe not, but it’s a step in the right direction for ING and others like them.Rebuilding trust takes time.
Smaller brandsshould see a chance to flourish
All across thecountry, fearful investors have been lighting up the phone lines to theirfinancial advisors with questions about the stability and security of theirinvestments and the brokerages themselves. Ken Eshleman, a Certified FinancialPlanner at EHD Advisory Services, Inc, a Lancaster-based financial servicesfirm, sees this as a great opportunity.
“Myclients are mad,” says Eshleman. “Mad at the system. Mad at Wall Street. Ithink people will be more uncertain about big financial brands in general. Forus I think it’s positive because we’re local and independent. It’s so ironicbecause it used to be that if you had a relationship with Merrill Lynch youwere in an elite class. Now it can be seen as a negative.”
Smallerinvestment banks are seeing opportunity as well. So says Phillip Gelso ofEvergreen Capital, LLC, a firm based in Columbia, Maryland. “It’s hard to makedeals when value is uncertain,” he notes. “Anxiety creates apathy. But we workso closely with our clients, compared to some larger firms, that we believethis should be a time of growth for us.”
Brands can fallovernight, but must build over time
For the big brandsthat have recently tumbled, it is probably too late for redemption. Many willgo the path of Bear Stearns and disappear, too damaged to warrant repairs, themarketing equivalent of totaled by a high speed collision with their own shakyinvestment decisions.
Wounded brands likeMerrill Lynch may survive as part of another company, but it will take atransfusion of brand equity from new owner Bank of America to lift them back toprominence. Most companies in the field will have to invest time and money inreinforcing their brand perceptions with their clientele. The greatest promisemay be for smaller brands in the financial industry that have remained stable.For them this is a period of opportunity to step forward, establish new relationships,and build brand equity amid the ruins of fallen giants.