In the world of financial services distribution, surely there can hardly be two businesses more generally disliked than St. James’s Place and Hargreaves Lansdown. But if you’re in that field yourself, just rein in your ill-will for long enough to think about them a bit.
You’ll agree, I reckon, that at first glance they look very, very different from each other.
The former is tied, while the latter (when it gives advice at all) is independent. The former is still almost entirely focused on face-to-face advice, while the latter’s business is very largely direct and execution-only. The former has a minuscule Head Ofice marketing budget, while the latter spends many millions of pounds each year on direct marketing. The former is often said to be troublingly expensive, while the latter is said to be great value. And, finally, the former makes its money out of affluent investors with very little enthusiasm for looking after their own financial affairs, while the latter specialise in the most confident d-i-yers.
But actually, if you look more closely, I’d suggest you’ll find that the similarities between the businesses vastly outweigh the differences. Some are more or less coincidental: both were founded and led through their growth phases by charismatic leaders, and both are now grappling with succession management issues as these leaders finally stand down; both are, from my point of view, disappointingly suspicious of people like me, my former colleagues in the creative agency world and anything with the slightest flavour of self-indulgent vanity marketing; and, as I mentioned, both generate a great deal of negative comment and criticism from their peers, although one strongly suspects that in fact this is mainly jealousy wearing a light disguise.
The jealousy, of course, arises from a much more important similarity. Both firms are hugely successful, each probably making more money than the rest of FS distribution put together, and both generating customer satisfaction scores so stratospherically high, especially in these cynical times, that they look like typing errors. And both are hugely successful for the same crucial reason: their founders’ and leaders’ deep understanding of their key target audiences.
Peter Hargreaves and Stephen Lansdown started with an almost unearthly level of insight into the hearts and minds of self-directed private investors. They seemed to know instinctively what to say, what to offer, how to engage with them, how to build relationships over time. For hundreds of thousands of d-i-yers, they’ve almost become part of the family: it’s a relationship not unlike the one that exists between great radio broadcasters and their listeners, such as Terry Wogan and his TOGs.
Mark Weinberg and Mike Wilson were arguably even cleverer, because they had to achieve the same total empathy with not one but two key target groups: the financial advisers who are the engine of their business, as well as the advisers’ end clients. In some ways the former have been more important and more fundamental to the business’s success, but for the purposes of this blog I’m more interested in the latter: the key things that Mark and Mike have always known is that there is no correlation at all between affluence and financial sophistication, but there is a strong correlation between affluence and a preference for premium brands.
In other words, according to this version of events, both businesses have succeeded as much as anything because they’ve succeeded as brands, and have done all the important things that great brands do – identifying a clearly-defined market segment, and then providing a consistent and distinctive proposition, in both emotional and rational terms, which catered to their market segments precisely.
(In so doing, by the way, both prove a concept from the brand development textbooks: people are happy to pay more for brands they feel good about. SJP is unmistakeably and unapologetically expensive: HL has needed to invest a bit more heavily in smoke and mirrors, but actually their customers could buy a good deal cheaper elsewhere if they chose to shop around.)
I’d say that both businesses, in their same-but-different ways, provide obvious and irrefutable evidence that brand-focused strategies work at least as well, if not better, in FS distribution as in any other consumer-facing service market.
Isn’t it extraordinary that so few other firms have had the nous to follow their examples?