MarketingSherpa wanted to hear from a senior financial media professional to better understand the significant challenges facing the industry. We interviewed Maria J. Lilly, founder of MJ Lilly Associates, a communications and brand strategy consultancy that integrates marketing and financial communications. Ms. Lilly held senior positions at First Boston and Edelman Worldwide and her financial clients have included Deutsche Asset Management, CSFB, DLJdirect, Chase Private Bank, GenAmerica and New York Life.
Q: What do you see as a major, sweeping trend in the delivery of financial products and services to consumers in the next year and beyond?
Lilly: It is clear that consolidation within the financial services industry will be the predominant theme over the next year and that has major consequence on the delivery of products and services. We will bear witness to the creation of very large firms with extensive global presence and the ability to present a broad spectrum of products. More and more diversified financial companies will come into being and have the ability to offer everything from insurance and mutual fund products to traditional banking instruments.
With the collapse of Glass-Steagall, we will also begin to see a greater deterioration in the two-tier system of investment and commercial banks as we adapt to the traditional European “Universal” bank approach that embraces both businesses. This will reshape the way financial institutions value their customers, both consumer and wholesale clients alike. Additionally, as fewer players result from the converging marketplace, competitive forces will become greater, dictating heightened differentiation among product offerings and quality service.
In addition, I believe that there will be an easing of restrictions in the purchasing of securities in overseas markets and exchanges—the advent of after-hours trading has certainly set the ball in motion for this principle—and international investing, either through direct stock purchase or mutual funds and country baskets, will become even more commonplace.
Since everything is cyclical, I would also not be surprised that in ten years, we begin to see a reverse trend in the consolidation process with specialty players emerging as the need to provide differentiation will warrant greater “focus.” The financial industry is very smart and has constantly re- invented itself. We can be assured of a decade of change: new products; greater reliance on new technologies and the Internet; and enhanced service offerings to establish differentiation in the marketplace.
Q: Who do you think will be the dominant players in the space?
Lilly: The dominant players will be those companies who are able to establish meaningful brand and solid reputation across multiple lines of business. This will come hand-in-hand with global reach—either through alliances or global expansion—to assure global research and product offerings.
I also believe success will depend on how smart company managements are—how visionary they are for long-term success and what type of culture they create to retain superior talent. The challenge will be in working hard—and working hard at service. Again, customers will be loyal to those who demonstrate care, concern and responsiveness.
Last, and perhaps most important, will be the ability to be flexible. Companies that can more readily adapt to changing market dynamics will be the big winners. Historically, American firms have been very good at this—seizing new opportunities with innovative products and services. Being nimble, however, will be a challenge given the size of the new global powerhouses.
Q: Is there really any brand recognition anymore? Were some companies foolish to spend as much as they used to on branding?
Lilly: Oh yes, there is definitely brand recognition in the marketplace – it is THE essential ingredient that ties together a company’s corporate positioning, marketing and now, in the new world order, its financial communications and investor relations. Brand defines reputation and that is what motivates customers to buy a company’s products or its stock. This is a new economy discipline that is slowly changing the way old economy companies market.
Overall, I don’t think companies have spent too much on branding—in fact, there have been companies who built their franchises on the strength of their advertising and marketing programs—the online brokerage industry is a great example of that. However, we are experiencing a rationalization on spending. As businesses have become more mature, the need to be profitable has become more important than exponential growth.
I also think that business-to-business companies, whether they are new entrants courtesy of the Internet space or old-line investment banking houses, have witnessed the value—emphasis here on the word value—in building “brand” and as such, have begun to adapt new consumer-marketing practices to build brand recognition.
Q: What resources do marketers of financial products online have to do their job better?
Lilly: I think some of the real keys have been online links and partnerships and industry research. To be a direct link on the AOL financial page, for example, is a direct link to increased sales. No marketer can beat that. Co-marketing and co-branding are important disciplines in the world of consumer marketing but that has transcended to a new level with online linkages. Companies with completely different products can very easily partner or link together to support and sell each other’s goods. This is a marketer’s dream—reaching target customers at low costs.
Industry research on the Internet has also been critical. Forrester reports have helped shape industries. Marketers understand that to be credible in the online world, it is important to win the endorsement of Internet research companies.
I think it’s important to look at the marketing phenomenon that set the stage for financial services marketing. When the Internet first launched, marketers of online financial products had a very targeted, built-in demographic—young, technically proficient and predominantly male customers who worked or played online. As a result, marketing efforts were created that would target this captive audience creating the early foundations for e-commerce. It’s clearly more challenging now as the Internet is becoming a tool more widely accepted across a broader range of people. But this early approach was a very useful way to build business and to develop meaningful marketing programs that could later be adjusted to meet the changing marketplace.
Q: What about institutional investors? Is the hype of the ECNs [electronic communications networks] over and done with? Has the Internet helped large fund and asset managers do their job better or faster?
Lilly: I don’t think we’ve begun to even fully comprehend how ECNs will impact the securities industry. We are still in the infant stages of this new technology and as it continues to evolve, it will affect how the financial markets operate which has major ramifications for institutional investors.
The Internet has changed the complexion of how large fund and asset managers do their job. Information is certainly more readily available and far more easily transmittable, giving asset managers more timely information in which to make investment decisions and adjust positions. This also makes reporting to investors more timely and efficient which is critical to large pension funds and even private equity investors. On the other hand, this also presents the challenge of making fast decisions and as information flows faster, it creates a more competitive environment.
Q: How has the recent wave of consolidation in the industry affected all of this? Will it make online brokers and banks more efficient/more accessible to consumers/investors?
Lilly: As I said earlier, the wave of consolidation is dramatically reshaping the industry as companies are attempting to broaden product offerings and vertically integrate to achieve economies of scale while garnering significant market share. Most interesting is that this is a global phenomenon not just a US domestic trend. There is no doubt that consumers and investors will reap rewards as the proliferation of the Internet has helped force the democratization of the securities markets as individuals have now been given access to the same information that was historically offered to institutional players. The whole point of the new economy technologies is to speed transmission and make information more timely and efficient for all of us. Online brokers and banks can only benefit from this as they meet the needs of customers in the new millennium and Information Age.
Editor's note: If you’d like to contact Lilly, call 718-855-1853 or e-mail: firstname.lastname@example.org.
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