Financial Industry - Build Trust

Today marks a day that I will never forget. I have been in the financial services industry for the past 10 years and these are times we will be studying for years to come. Today’s market (stock price) is not a reflective indicator of the company’s actual net worth. For example in the past 2 weeks we have seen a merger between Washington Mutual and JP Morgan Chase and most recently a merger with Wachovia and Citigroup. This is what I consider the last man standing epidemic that is happening on Wall Street. When the music stops every one is looking for a chair and once all the chairs are taken the last person standing should be prepared to exit the stage.

What is very aggravating is the impact the media has on the stock price and reminds me of the movie Boiler Room. In the movie brokers are calling customers pitching them a great idea having them buy in and then the firm begins selling off the stock to reap the benefits on the way down. Hedge Funds today are doing the same things to financial stocks picking one after another attacking it dumping the shares and driving the value of the company into the ground. For example on Friday, there were firms that traded over 900% normal share volume. The market trades on speculation and fear and builds momentum along the way leaving companies powerless. Then the media steps in to drive the nail in the coffin announcing lead articles, “X Company loses 50% today.” The average consumer does not have the time to research and investigate the real financial condition of the firm all they know is losing 50% value cannot be good. This changes consumer behavior immediately causing anxiety, panic and concern thus leaving the firms answers questions that really cannot be answered because the price has been driven by speculation. So the only fundamental position the firm can hold with the consumer is Trust.

Should you Trust your newspaper or trust your banker? Has your newspaper every sat down with you and talked about your financial future from start to finish? Has your newspaper been able to help you through a financial planning exercise because you need to put an addition on for the new baby? Has your newspaper looked at you and said we can waive your overdrafts because we know everyone makes mistakes from time to time? I would guess the answer to all of these is no so why is it that we trust the media in difficult times when we should trust our advisors.

Times like these cause for constant contact and information sharing - be proactive not reactive. Today if you are a sales person in the financial services business you should be meeting with your clients, hosting conference calls, webinars explaining what is taking place and what you recommend for the future. Be prepared to answer the tough questions and do not hope the customers do not know what is going on after all you would rather then hear it from you then catching it on the 6 o’clock news. Think of it this way if your doctor found problems with your blood work you would expect that she tell you now rather than finding out later on your own. The strong will survive and it is our choice of how we will handle the adversity.