WealthManagement Magazine

Will It Fly?

Mergers and alliances, together with technology, is creating the best cross-marketing opportunities the industry has ever seen. But the question is, can firms leverage this opportunity into profit or will the complexities of cross-selling prove too formidable to overcome?"This is a tough one," says Dennis Gallant, a consultant with Cerulli Associates in Boston. "The opportunities are there, but the

Mergers and alliances, together with technology, is creating the best cross-marketing opportunities the industry has ever seen. But the question is, can firms leverage this opportunity into profit or will the complexities of cross-selling prove too formidable to overcome?

"This is a tough one," says Dennis Gallant, a consultant with Cerulli Associates in Boston. "The opportunities are there, but the ability to take advantage of them is something else entirely."

In its simplest form, cross-selling or cross-marketing is the act of trying to sell multiple products or services to existing customers. The logic being, of course, that it is easier to sell to an existing customer than find a new one.

But for all the supposed simplicity, financial services firms have never been all that successful at making the concept work. In many cases, the supposed synergies that were to bear fruit after numerous industry consolidations never happened.

Why has successful cross-marketing proved so difficult?

For one, various regulations have always limited the ability of firms to bring certain products and services under a single roof. For another, different cultures at firms-and within different industry sectors-have not made it easy, or always desirable, for brokers to handle products brought into the fold through a merger or alliance. Plus, disparate commission rates and unfamiliarity with new products have proven an impediment to brokers in expanding their product lineup. And finally, the traditional way of conducting full-service business-individual brokers with a personal and often highly guarded relationship with their customers-can limit the flow of information necessary for a successful cross-selling effort.

"To be sure brokers want to sell products, but most won't jeopardize hard-won relationships by pushing products just because they are made available," says Gallant.

This is not to say brokers are obstinate or opposed to cross-selling programs, but as the ones who develop and maintain a personal relationship with their customers, they can be finicky when it comes to sales decisions. A sales campaign that may appear to make sense in the boardroom doesn't always play as well on the front lines.

"I've built up my business by providing opportunities that match my customers' needs. I can't suddenly push things on them because the firm acquired a competitor," says one veteran broker.

Many reps say they are reluctant to participate in sales initiatives that often accompany new products. "There comes a point when customers are no longer thought of as customers but convenient outlets for products, and that's not good," says one New York broker.

Just beneath that sentiment is the knowledge that most large mergers have little to do with retail product offerings, but are instead typically driven by the desire of a firm to gain a foothold in new lines of business, strengthen their asset base or simply be the biggest. It is rarely the products themselves that are the critical component.

"Certainly banks, for example, covet the increased possibilities they get through affiliations with securities firms, but generally, the retail products themselves aren't the primary interest," says Michael Gazala, an analyst with Forrester Research in Boston.

For many brokers, that means they are being asked to help cross-market products simply because they are there. While at the same time they are asked to offer up information about their clients' investment habits so someone from a new division, a mortgage loan specialist for example, can go after more of a client's business.

Others argue that with so much competition from other providers, the desire on the part of firms to launch cross-marketing efforts is mostly a sign of support for the broker.

"It's a way of making sure that they have everything they need to be successful. But still there must be a genuine commitment by everyone in the firm if the cross-marketing is really going to work," says Jay Nagdeman of Nagdeman & Co. in New York, an industry marketing consultant.

Brokers at Dean Witter, for example, were delighted to get a crack at Morgan Stanley IPOs. Just as Morgan management was delighted to have Dean Witter's large broker force behind the effort. However, a credit haircut took some of the steam out of brokers' enthusiasm.

"I imagine it was grumbling at Morgan that made them cut back on the commission scale," says one Dean Witter broker.

Technological Marketing At Fidelity Investments in Boston, the firm is revamping technology to allow different divisions to share information.

"We have customer mutual fund data that can be shared with our brokers or retirement services marketing department," says Ted Charettee, who is heading Fidelity's technology effort. "This will open a world of possibilities for us."

It is the sharing of information that is the heart and soul of any cross-marketing effort. Yet the culture at most brokerage firms isn't always conducive to the idea of sharing customer data.

"Many brokers just don't like the idea of giving up an exclusive relationship with a customer," says Andrew Guilette of Cerulli Associates.

According to Julio Gomez, president of Gomez Associates, an industry consultant in Boston, the advance in Internet technology will move cross-marketing into the 21st century.

"Web sites are information-gathering centers, and because they are computer- based, the information can be compiled and used in a variety of ways," Gomez explains. Firms will have more information about their customers and their investment habits then ever before, he says.

As an example, he notes firms will continue to add functions to their Web sites to increase customer use and to track everything from which stock prices they are looking at to what research they are browsing.

"It will be a lot easier to focus sales campaigns when you have a detailed profile of investors' interests," says Gomez.

But once that information is gathered, will firms and brokers be ready to make maximum use of it?

"Only if it allows us to serve clients," says Lawrence Silver, vice president of marketing for Raymond James in St. Petersburg, Fla. "No one is interested in unloading product on anyone just because it is there."

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