for refreshment (full disclosure: I own Coca-Cola stock). Brands essentially have the function of making you buy a product, paying more for it than it’s really worth and gaining imponderables such as status, “coolness”, recognition, prestige, perceived quality, and trust. Social proof (“if everyone has it I want it too”), safety in numbers (“if I’m wrong every body else is”) and the no-one-gets-fired-by-hiring-IBM syndrome are very powerful if totally irrational elements in this context: herding and laziness always win. (For the record, it is worth remembering that when brands fail they do so with a big bang: think VW, Nokia, New Coke, Bear Stearns or John Paulson.)
Does a brand make sense in the context of financial “products”? You can see yourself in dark sunglasses arriving at a crowded venue with your Ferrari-Red Ferrari and be assured of a nice pick for that evening’s date; but what if you arrive at a party with a tag hanging from your neck saying “I bank with J.P. Morgan”? Probably just the value of your account will do. (I’m not picking on JPM; it’s just the first name that came to mind.) Aside from the personal nature of this information (the classification is cultural: it’s not for Americans but it’s very much so for the Swiss), what exactly do you gain from publicizing a brand for a service which is essentially a commodity? Or are you the type of person who’d say “I only refill at Shell gas stations?”
Big financial institutions will provide custodian services, beefy research departments, massive marketing support, inquisitive compliance, wide choices of strategies, polished environments and usually a rather attractive sample of the human race from either sex to look after your account. Of these you really need the first, as the benefits derived from the rest are almost never enough to cover the additional costs. What you also need is trust. While there are many who claim to deliver it on a platter (for the price, it better be of platinum) it’s very difficult to trust an aggregation of people. Usually you end up trusting a few individuals, which is how human relationships are built and which is why going for the big names or brands in financial services is not always in your best interest.
Acknowledgements: I am grateful to my friend Steven Bates, CEO of QLAB Invest, for his kind contributions, and for putting up with a messy draft.