Five Years after Lehman, Morgan Stanley’s Brand Bounces Back – But Will Enough People Care? Morgan Stanley’s New Fight for Relevance
Five years ago, the collapse of Lehman Brothers plunged the U.S. and the global economy into a state of free-fall, a crisis we are still reeling from today. In the aftermath of the financial meltdown, life on Wall Street has transformed dramatically. Risk, once hailed as the driving force behind Wall Street success, has little place today in this new, regulation driven economy.
Of all the investment banks, one in particular has emerged a different animal, completely re-branding itself to adapt to its new surroundings. Morgan Stanley has undergone an extreme makeover, transforming itself into a less risky, wealth-management and retail-brokerage focused firm. Receiving the regulatory approvals earlier this year, Morgan Stanley has finally completed its purchase of brokerage firm Smith Barney, a $9 billion acquisition from Citigroup. "This is a historic day for Morgan Stanley. It is the culmination of a multi-year effort to transform our business model into one that offers stronger shareholder returns and greater stability in volatile markets," CEO James Gorman said in a recent statement. Re-branding Smith Barney as Morgan Stanley Wealth Management, Morgan Stanley cemented its transition by simultaneously shedding its riskier units, including proprietary trading desks that bet the firm’s own money. Focus has shifted away from the traditional bread-and-butter institutional securities business in favor of stable, albeit smaller margins. This unprecedented makeover has rendered Morgan Stanley a closely scrutinized “experiment in finance” by competitors and analysts alike (WSJ, “Life on Wall Street Grows Less Risky”).
But how does Main Street perceive Morgan Stanley’s re-branding effort? Delving into Brand Asset® Valuator metrics tells a generally positive story. Looking at full year data from 2009 to 2012 for U.S. adults, Morgan Stanley has experienced upward momentum in all of the BAV four pillars comprising Brand Equity: Energized Differentiation (what distinguishes a brand from its competitors), Relevance (how appropriate and applicable a brand is to the lives of consumers), Esteem (how well-regarded a brand is), and Knowledge (how familiar consumers are with the brand). BAV measures each brand relative to a representative portfolio of brands (3000+) across all industries (e.g. an Energized Differentiation score of 20 means that 80% of brands in the 3000+ portfolio are more differentiated). In a low differentiation category, Morgan Stanley held the highest Energized Differentiation score (19th percentile) in 2012 among all adults vs. the competitor average (1) (7th percentile), surpassing even Goldman Sachs (10th percentile), the only other stand-alone investment bank. Moreover, several positive attributes, such as Distinctive, Prestigious, Worth More, Unique and High Performance, have all increased in association with Morgan Stanley since 2009. The positive trend is further amplified among a higher-income demographic. Among those with a household income of $100K+, Morgan Stanley has seen increases across all pillars since 2009, especially in Energized Differentiation (a 73% jump from 2009 to 2012). The uplift in Morgan Stanley’s Brand Equity signals that James Gorman’s revamping of the firm has been recognized beyond the Wall Street audience.
Source: BrandAsset® Valuator USA All Adults 2009-2012
Source: BrandAsset® Valuator USA All Adults 2009-2012
Source: BrandAsset® Valuator USA All Adults HHI $100K+ 2009-2012
However, Relevance remains Morgan Stanley’s weakest pillar, despite increases among the 100K+ population since 2009. Even with the strategic shift towards individual clientele through Morgan Stanley Wealth Management, the firm struggles to be applicable to a broader audience. Goldman Sachs, the only peer without a commercial banking unit, faces the same Relevance obstacle. JPMorgan Chase, Bank of America, Citigroup, etc., on the other hand, are fully integrated in the lives of every day consumers. In addition to credit cards and bank accounts, Citi’s initiatives in New York City, including “Citi Pond” and “Citi Bike”, have promulgated its Brand name through channels beyond its immediate lines of business. Although the majority of consumers have heard of the brand, Morgan Stanley’s actual function is little understood, remaining obscure and inaccessible.
The ambitious transformation of one of Wall Street’s oldest and most established banks is anything but easy: James Gorman continues to faces criticism both externally and internally. Decreased compensation, grueling hours, and impending regulations have driven talent out the door toward hedge funds and tech companies. The selling of PDT (Process Driven Trading), the firm’s most profitable propriety-trading desk, left a painful reminder of the pre-crisis heyday. However, unprecedented times call for unprecedented measures. Morgan Stanley stands out as a versatile powerhouse that’s willing to adapt, attempting a historic re-branding replete with criticism and praise. Will Morgan Stanley succeed? Can Wall Street continue to prosper in light of tough regulations and government scrutiny? The whole industry is eagerly anticipating the results of the Morgan Stanley experiment.
(1)Competitors include: Goldman Sachs, JPMorgan Chase, Bank of America, Citigroup, Deutsche Bank, and Barclays