Only the Excellent Survive - Why Marketing is More Important Than Ever for Financial Services Firms

As has now been endlessly documented, the business and economic world changed in 2008 - and financial service firms were at the center. However, in my opinion, too few FS firms have actually come completely to grips with the epic (and permanent) change we have undergone. Let's start by reviewing a few staggering facts.

• A total of $6 trillion — and counting — has been lost in the real estate market. This represents real wealth lost, as since the mid-1980's Americans increasingly turned to home equity as a semi-liquid primary source of funding for major purchases - whether cars, home improvements, college, vacations or retirement. That money is gone, never to reappear.
• At its peak, stock markets were down ~55% from 2007 peaks, wiping out entire 401(k)s and 529 plans, as well as causing Main Street investors to flee equities in record numbers. Total value lost between 2007 and the bottom? An estimated $8 trillion. Even should stocks near pre-crisis levels (unlikely anytime soon), regular investors will be on the sidelines.
  Regular savings accounts — money market funds, CDs etc are generating near-zero returns since early 2008
• The availability of credit — the aforementioned home equity loans/lines as well as all forms of unsecured and secured credit — has shrivelled to a mere fraction of pre-crisis levels.
• 7 out of 10 Americans fear losing their jobs, and 16.5% are unemployed or underemployed. This almost three years into the crisis, when things should be on the upswing.
• Macro uncertainty has rarely been greater. Is there an epic bond bubble forming? Will deflation-like conditions hit the US as they have Japan? Or is hyper-inflation next? Will US debt burdens become overwhelming?

The biggest wealth creators of the past two generations — equities and real estate — no longer function as such, prospects for better incomes through employment and career advancement are stubbornly gloomy, and the future looks at best vastly uncertain, if not downright scary.

Demographic shifts loom.

On top of this once-in-a-lifetime financial meltdown are two mega-trends worth mentioning: The first is the massive demographic shift underway as Boomers enter retirement, so-called Generation Xers enter the prime of adulthood, and Millenials face massive uncertainty. What's it all mean? Even if the financial crisis had not taken place, generational shifts were already fundamentally changing consumer financial behavior. The crisis has sent this change into warp drive. Second, we're still only in the infancy of a fundamental change in the role of technology in our lives. The internet is evolving and morphing at an astonishing rate, and consumers interact with technology today in ways completely alien to marketers only a few years ago. These two trends in themselves are resulting in new consumer behaviors, behaviors which most marketers are only beginning to come to terms with.

Marketing matters. More than ever.

So why does marketing excellence matter more than ever? Because the conditions described above have fundamentally and permanently altered the consumer landscape. Because this new landscape is characterized by a deep-seated shift in values. And because changing values are fundamentally a marketing challenge - requiring new research, new insights, new targets, new objectives, new strategies, new techniques, new programs, new measurement, new everything.

And why is marketing excellence especially important for financial services firms? Because these firms are at the epicenter of these changes. Money matters. And the value/behavioral shift in the financial services space has been the most radical in memory. One small case in point: at the height of the crisis, fully 82% of high-net-worth individuals surveyed stated they were actively seeking to replace their financial advisor.

What's stunning is that of all relationships in financial services, the one between advisor and client had always been the strongest. When a fundamental breakdown of trust occurs here, you fully well know that other, more tenuous relationships across the entire category are fully at risk.

Marketing is central.

In a world where roughly $14 trillion of wealth has been erased, there's obviously less money to go around. Therefore, it's share growth — not category growth — that is paramount. In financial services, share growth largely parallels relationship strength, which is in many and varied ways fundamentally a marketing function.

Whether brand advertising to solidify or alter fundamental company attributes, database mining to identify new market segments, or sales training to increase cross-selling/upselling opportunities, marketing plays a central role.