Two weeks ago at our Financial Services Forum Europe in London, I found that an American can win over a tough European crowd -- by disparaging the bad boys of US business. I played to the crowd with slides of Yankee rogues like Frank Quattrone, Jack Grubman, and Dennis Kozlowski -- whose just-released birthday party video shows that even $2 million can't buy good taste.

Of course, the bigger lesson from Kozlowski -- and Grasso, Ebbers, and all the others -- is this: People get quite ticked off when they realize that someone they trusted has not had their best interests at heart.

The outlaws can take down whole companies

This kind of bad behavior brings down not just individuals, but also whole firms. Twenty years ago, as a pup out of college, I worked at E.F. Hutton, a brokerage run by cowboys who got caught kiting checks. That firm never recovered.

Later in the '80s, managers at Prudential Bache Securities perpetrated a massive securities fraud that still haunts the firm. Today, Prudential Securities is dead-last among 15 top brokerages for customers willing to consider the firm for their next financial purchase. We combined purchase consideration with other factors like interest in buying banking products from a brokerage to calculate cross-sell potential for the top US brokerages. Prudential ranks second to last in our index (see the figure to the right).

Some firms still don't get it: A number of other companies, including Morgan Stanley and Putnam, face fresh allegations of putting their own interests before customers'.

Using advisors to get right by customers

Cross-sell laggards like Morgan Stanley, Merrill Lynch, Smith Barney, and Prudential can use their human advisors to reassure customers that they do have the customers' best interests at heart.

But even that is getting harder, because investors who use advisors are prodigious users of digital channels, where interactions are impersonal, reactive, and firm-centric -- a stark contrast to the intimate interactions that clients have with their brokers, financial planners, and private bankers.

What's a full-service firm to do? We think smart ones will extend their advisors' presence into the digital channel and enrich interactions that can't be face-to-face with collaborative advice technology.

Banks can blend high-tech with high-touch, too

Financial services firms have just started to discover how to use electronic channels to engage customers in new, proactive ways -- such as personalized, opt-in email and SMS alerts. Smart banks will embed cross-channel tools like agent cobrowsing at critical moments in a sales process to make electronic channels more high-touch.

Got feedback?

As always, we're eager to hear from you. Do you have topics to recommend, data you need, or technologies you want assessed? Drop me a line with your input at billdoyle@forrester.com.


Bill Doyle
Financial Services Research Director

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