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You can&#39t softsoap the public

When you buy a soap powder, there is very little commitment to the product you are buying. Provided it washes your clothes effectively and without damaging them, you will probably be satisfied with your purchase and are quite likely to buy the same brand again when it has run out.

But if, when you go to buy it again, you find that it is not available, you may be mildly disappointed but will buy another brand without a great deal of concern.

When it comes to investment, by contrast, you are making a long-term commitment and your implicit expectation is that the company managing the investment is making the same long-term commitment. This is particularly true if you are buying a pension, since you may be investing into that pension for 30 or 40 years and then drawing on it for a similar period. There can hardly be a longer-term commitment in a commercial transaction.

Why is it, then, that brands in soap powders seem to last so much longer than investment brands? A cynic – or perhaps a realist – might answer that the reason why soap powder brands last so much longer than investment brands is that it has been possible to make money quickly from selling investments, whereas it takes much longer to make a lot of profit from selling detergent.

The level of profit on each sale of soap powder, although high in percentage terms, is low in monetary value. To make real money, there needs to be a very big number of repeat purchases, so it is important to ensure that customers get what they want, can identify with the brand and know that they can rely on it over a long period.

In the past, the opportunity to make a lot of money from single sales of investments has been considerable and only recently has it become of paramount importance to achieve repeat sales as profit margins have been squeezed by competition and regulatory constraints. This has meant that the investment industry has been able to be complacent about sales and about the way it maintains its brands. There has been a widespread cult of the short-term in this business that, ironically, preaches the importance of the long term.

There have been a few notable exceptions to this short-term approach, in most cases as a result of one person who has held to a single-minded view over a long period. But that is precisely the weakness in the investment industry – when that person leaves, the whole approach to investment, customer care and brand is likely to be reviewed and changed.

At the core of marketing activity by investments companies, an appeal to the greed of investors has taken the place of building a brand. Performance is not brand. It is an element of brand but it has far too often been treated as synonymous with brand. Striking examples of companies that have promoted performance as their brand in recent years have been Perpetual, Jupiter, Aberdeen and now New Star. The problem with this approach is that when the performance wavers, so does the brand.

Another factor that has conspired against the development of real brands is the role played by IFAs. New investment companies have found it cheaper to sell their products through IFAs than to develop their own franchise. This has enabled new entrants to gain a significant position in the market quickly and with low risk but this ready access to the market has a hidden and substantial cost. Many investors only access the investment market through an IFA and the investment companies have therefore been cut off from their customers.

There are two principal ways to counter this isolation and both appear to be costly although the cost of doing nothing may prove to be much greater in the long run.

Companies can choose to sell to investors through direct marketing or they can carry out brand marketing campaigns – or they can combine the two. One company that stands out as having successfully faced up to the dominance of the IFAs in recent years is Fidelity. It has incurred their wrath on more than one occasion but such is the power of its brand and its reputation that IFAs cannot afford to ignore it.

What Fidelity has done is to establish itself as an investment brand that investors can trust. It makes no promises that it cannot fulfil and it stays outside the constant fight to stake the claim to the best performance. This does not mean that it never refers to performance – only that it is kept in its place as just one element of why investors should trust Fidelity with their money.

Investment companies need to develop a brand vision that goes far beyond an unfamiliar and “constructed” new name, an exciting new logo or advertising style or discovering a passion for customer care. All of these things are significant in the creation of a serious brand but they are only outward expressions of the brand.

The brand should be a much more fundamental distillation of what the company is based on a set of values and business beliefs that can be shared by everyone who works for the company and be reflected in everything that the company does.

But the creation of a distinctive brand alone is not enough – there needs to be a process that will outlast the individuals that oversee the creation of that brand and that will form a framework for generations to come.

An example that investment companies might consider is Shell. The Shell brand of today would still be recognisable to somebody living in the 1930s although it has gone through many revamps since then and through some turbulent times such as the notorious Brent Spar episode.

The lesson that Shell learnt was that companies cannot force their views on their customers. As a result, it now listens to its customers. Shell takes very seriously the need to cosset brand and reputation: Shell trusts the customer – the customer trusts them – the customer stays with them.


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