Unheeded warnings

In a post-expert age, how can financial communicators distinguish their organisations?

Dark clouds over London’s financial sector are one more sign of the challenges facing Europe’s financial communicators. Image: iStock.com

As the Brexit shows, messages from the financial sector can be too easily ignored by disillusioned audiences. With financial institutions all tarred with the same brush, it has been difficult for the industry to make its voice heard even when it has a strong case. In these circumstances, it is the role of the communicator to make sure that a clear business strategy is articulated.

The crisis was provoked in the first instance by the heedless growth in opaque US asset-backed and mortgage-backed securities market and much lowered criteria for risk taking by the banking sector thanks to the implicit subsidy offered to the sector by governments.   

The global financial crisis has been explained to death in books and newspaper columns with the advantage for the financial sector that blame has been attached to inchoate and blameable actors like dark pools, shadow banking, bad incentives and short-termist culture – innately bad things that we need to do something about.

Ten years on, after a mountain of financial regulation and a shamefully low number of prison sentences, the general population seems to have ‘banker bashing’ out of its system and the finance sector goes on pretty much as it always did in terms of all its failings and potential for catastrophe.

The reputational impact of the global financial crisis was indiscriminate and overwhelming. All financial institutions were considered equally to blame and so tarred with the same dirty brush – banks, hedge funds, exchanges, venture capital, private equity – or at least during its initial phase.

As a media adviser for a major global exchange group and also in my previous role at the World Federation of Exchanges I have had to go out of my way to stress that the roots of the financial crisis – the tangled web of financial transactions which brought down Lehman Brothers – was not only nothing to do with exchanges, but that exchanges were really part of the solution all along.

A post-expert age?

But fallout there was for many and the toxic half-life of the global financial crisis is not over yet. As the Brexit vote demonstrated, one clear casualty of the crisis was the financial press and its claim to expertise. In the run up to the referendum, the grimmest and gloomiest warnings of the leading international financial press made little dent on the mood of the majority.

“As Brexit demonstrated, one clear casualty of the crisis was the financial press and its claim to expertise.”

Maybe people have got too used to the likes of HSBC and Deutsche Bank and JP Morgan crying wolf and threatening to leave London if the UK Treasury didn’t do things exactly the way they liked them to be done. Financial institutions have pushed the panic button too readily and treated the serious financial press as a forum for lobbying and self-serving forecasts. They have suddenly found as a result that they have been stripped of their traditional claim on credibility and expertise

So, if financial institutions no longer find their message getting through, maybe they have only themselves to blame.

During the recent Brexit referendum the same scepticism was applied to all the perilous warnings issued by the likes of the International Monetary Fund, the Organisation for Economic Co-operation and Development, the Bank of England and the UK Treasury. All were blithely ignored. Gone are the days when the CEOs of the country’s 100 leading businesses or 365 economists could hope to sway the votes of millions – everything was tried this time and nothing seemed to work.
The failure to lay blame for the global financial crisis where it was clearly due has led to most people mentally opting out and adopting a ‘they’re all to blame’ attitude – all including bankers, brokers, hedge funds, even financial journalists.

German and UK attitudes towards the euro

The task the Commission faces in building a Capital Markets Union (CMU), especially now with the UK and City of London gone from the EU scene, is daunting. The driving theme of the CMU was that Europe’s SMEs would turn to cheaper and more flexible capital market financing and away from their traditional reliance on bank lending – the aim being to recreate the dynamic and flexible capital market financing as well as the more vibrant business creation record of the US.

The sad fact is, however, that since the crisis the European mentality has turned even further against the markets and even more in favour of just leaving one’s money in the bank or getting one’s business loan from the local sparkassen or landesbank.
German attitudes towards bond and equity markets are of course poisoned by their historic experiences with hyper-inflations in the 1920s and after the war. In Germany the backlash post crisis was more knee-jerk way – in other words for Germans. For the population the GFC was a myth-affirming experience – and their distaste for financial novelty and capital markets remains unchallenged. And that is despite the pivotal role played by German banks not the stock markets in both the global financial crisis and the euro crisis. The fact is Germans are now less likely to invest in stocks and shares than they were five years ago.

Certainly, we have tried to stress the real economy/SME-financing benefits of what exchanges can do. But this message has some way to go to attain any traction with the general populations of the euro zone.

The Association for Financial Markets (AFME) in Europe staged a remarkable campaign to revive the European asset-backed security (ABS) market as a tool for SME financing and this became one key plank of Commissioner Jonathan Hill’s CMU plan. Given the reputational toxicity of ABS at this point all due credit should be paid to AFME for this effort,  but now we wait and hope to see if this part of the vision for CMU will survive Brexit.

“The media’s preference is for continued sturm und drang rather than deals being struck.”

Deutsche Börse’s merger with the London Stock Exchange has promised to establish a liquidity channel between City of London and Frankfurt, mobilising the internationally mobile funds which London is so adept at attracting and potentially pumping these into the heart of the euro zone.

We are still working hard to get the  message across about the fundamental benefits of this for the real economies on both sides of the channel – a difficult task at a time when the media zeitgeist is all about disruption.
The same is true of the Brexit narrative, at least for the time being. The media’s preference is for continued sturm und drang rather than deals being struck or investments being planned.

Nasdaq’s success at riding the  zeitgeist makes it a communications success story; Deutsche Börse’s merger with the London Stock  Exchange promises a liquidity bridge between London and Frankfurt. Images: iStock.com

Financial communications success stories

On that note, let’s look at some of the communication success stories of recent times. BATS Chi-X Europe is one: a decade-old high-tech stock exchange, which still manages to earn the sobriquet ‘upstart’ whenever it is mentioned. That is coverage you can’t buy, as they say. BATS has come from nowhere to become the biggest equity exchange in Europe by turnover in just 10 years – it is seen as innovative, high-tech and go-getting, a reputation no doubt helped by assiduous and focused nurturing of key media like FT Trading Room, Financial News, The TRADE and others. It also maintains a lively social media profile but has not played the social responsibility or governance card – as have many other financial institutions – in any way at all.

“The current pervasive lack of confidence in experts affects everyone.”

ICE, or Intercontinental Exchange, has also won a solid media reputation for focus and clarity in its pursuit of its core business, futures markets. This has done its branding no harm at all. Nasdaq, meanwhile, has not done too badly with a strategy of close association with innovation and high-tech, with the environmental, social and governance agenda and working with emerging markets. Nasdaq CEO Robert Greifeld famously called his firm “not an exchange, but a technology solutions provider with an exchange attached”, showing the continuing value of a brilliant soundbite, especially when it chimes with the prevailing vibe. But as these examples demonstrate, narrative is all.

Recent events at Deutsche Börse and the London Stock Exchange will, I am sure, underline their reputations for bold action, strategic foresight and perseverance.

Disruptive fintech in general, such as anything to do with Blockchain or Bitcoin, have also had a good press run, although this seems to be based more on good things to come rather than good things already achieved.

So good finance public relations can still be achieved but it seems to be based on a clear sense of corporate direction and brand identity. The current pervasive lack of confidence in experts, however, affects everyone. The current time is not one for public relations arts and blandishments with the truth; it is time for a return to a conservative management of expectations and a focus on core media stakeholders. If a few positive media shocks can be engineered along the way – that is a welcome bonus.

The safe strategy

  • Get your core targets tight: get the leading financial dailies or the mainstream nationals securely on side and others will surely follow.
  • Defend your perimeter and contain critical outliers – essentially those media targets whom you will never get on-board – no matter how compelling and brilliant your arguments.
  • The positive shock is also an apt tool for the established firm trying to dispose of historical baggage.
  • But these are mere tactics. What is all important is the need for a robust underpinning narrative about your history and reputation. Get that right and everything else will be much easier.

David Thomas

David Thomas joined Deutsche Börse in 2014, when he ran the German exchange group’s London communications and government affairs before becoming senior spokesperson for Clearstream, Deutsche Börse’s post-trade and custody arm, in 2015. He then moved to the World Federation of Exchanges, where he was head of communications, before returning to Deutsche Börse to take on his current role. Before entering public relations, he was Brussels bureau chief for Knight-Ridder and BridgeNews before joining Market News International where he became London bureau chief in 2005.