The Financial Three: A Strategy Implementation Analysis

The success of a strategy’s implementation can be seen in an array of different ways, beginning with the employees and ending with public perception, which is often a precipitant of consumer interaction and product delivery. The HBR article, “Can You Say What Your Strategy Is?”, cited some fascinating company examples that were extracted from the financial industry, and coincidentally, offered insights that resonated with my own experiences with those very companies—namely, Edward Jones, Merrill Lynch and Wells Fargo. Through a blend of my experiences and research, the “successful” strategy components of these three companies that were touted in the article have since been either confirmed or challenged

In St. Louis, where Edward Jones is headquartered, the degrees of separation between people in the community and the company are relatively small. All three of my indirect connections to the company have confirmed Edward Jones’s strategy, demonstrating its successful implantation beyond the executives’ conference table. My neighbor was a financial advisor for the company, and he had moved from a small town of 6,500 people in Illinois to assume a new role at the corporate headquarters. The face-to-face advising with customers, of whom he had built a strong relationship of trust with, was very important to him, and so when he moved, the community trust he had garnered was transferred to his brother, who took over the financial advising at the local Illinois office. This was confirmed years later by a friend in college, who’s mom was a former client of my neighbor and now a current client of his brother. In addition, my brother’s girlfriend, who majored in psychology at Washington University in St. Louis, also works at Edward Jones, but as a Solutions Specialist. In her words, she “brings together internal and external research to help financial advisors better understand and communicate to their clients.” Such a role reflects the company’s effort to assist advisors in strengthening that client relationship and trust for which their strategy is aimed to achieve, and the continued success of the company has demonstrated the company’s effectiveness in executing its strategy.[1]   

Shifting from the well-executed company strategies to the one’s that left their companies vulnerable, we look no further than Merrill Lynch and Wells Fargo. Since the HBR article was published, the former had to be purchased by Bank of America to stay afloat and the latter was plagued with securities-fraud penalties.

Merrill Lynch’s objective was to maximize pre-retirement asset accumulation for high-net-worth clients, and the means for which the company depended on to deliver such an objective was rooted in their offering of financial plans that included “a wide range of sophisticated products”, according to Collis and Rukstad. Unfortunately, those products included complex derivatives, such as synthetic collateralized debt obligations, that were derived from risky mortgage assets, and which left the company extremely vulnerable during the 2008 housing market crash due to their over-leveraged position.[2] This contrasts from Edward Jones’s position during the crash due to Edward Jones’s conservative-investment strategy.

In the case of Wells Fargo, there has been a major effort as of late to shift its growth strategy from cross-selling its services (i.e. loans, credit cards, brokerage accounts) to becoming “the financial services leader in customer service and advice,” according to CEO Timothy Sloan. This effort came about after it was discovered that the company had opened approximately 2.1 million accounts using “fictitious or unauthorized customer information.”[3] The unethical and fraudulent activity was said to have been a result of the company’s overly-aggressive sales quotas that were intended to boast company growth and consumer interaction.[4] While Wells Fargo’s 2017 Annual Report emphasized its new focus on customer’s and their overall satisfaction by introducing employee measurements on customer service, customer usage and deposit growth, it still remains unclear what true advantage the company is leveraging to achieve their new overall objective and if enough has been done to establish an appropriate means to accomplishing their objective. The Wall Street Journal interviewed a company executive who voiced similar sentiments when they were quoted saying, “How am I going to grow the business…with these constraints? How do I do it in a way that doesn’t appear to be sales pressure?” [5] It goes to show the challenge companies face when developing a new strategy, and the even greater challenge of implementing it.

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[1] https://www.azcentral.com/story/sponsor-story/top-companies-2017/2017/06/01/focus-clients-key-success-edward-jones/102315514/

[2] https://www.nytimes.com/2008/11/09/business/09magic.html

[3] https://www.wsj.com/articles/wells-fargo-focuses-on-pivot-from-scandal-to-growth-1496914205?ns=prod/accounts-wsj

[4] https://www.fool.com/investing/2016/09/09/2-million-accounts-wrongly-opened-at-wells-fargo.aspx

[5] https://www.wsj.com/articles/wells-fargo-focuses-on-pivot-from-scandal-to-growth-1496914205?ns=prod/accounts-wsj