The Exodus Continues

In 1983, American Express acquired a financial advisory group from Allegheny Corp. and joined the parade marching to the financial supermarket. As an American Express cardholder, I can attest to the fact that this concept was marketed aggressively over the years. I and other cardholders were given ample opportunity to partake of American Express financial advice and use of their products.

These were the leaders of this movement. There were and are others, of course, but it was these four companies that started the movement. And so, 25 years later, it is only fair to ask, how did it go?

Sears never really got beyond the prototype phase. The few supermarkets they opened closed a short time later, this time with no fanfare. Some opined at the time that Sears really didnt have the kind of customer base that lent itself to sophisticated financial supermarket planning and so that this was not a valid test of the financial supermarket concept.

From all indications and from numerous outside reports, Prudential never did successfully digest Bache and assimilate it into either its corporate culture or profit structure.

According to the Feb. 2 issue of The Wall Street Journal, the latest player to throw in the towel is American Express. The report states that the financial advisory business lagged well behind the companys other businesses. It also quoted Sheryl Garrett, founder of Garrett Planning Network, as saying: “By segregating the financial services division, it helps remove the perception that youll be cross-sold, which consumers do not want.”

Whether you believe that or not, it is a critical aspect of this issue, for cross-selling is the whole basis upon which the supermarket idea was built. It is also worth noting that when American Express announced it was going to spin off its financial advisory unit, its stock rose 6%.

Even before the American Express move, Citigroup announced it was selling its Travelers life insurance and annuity unit to MetLife. Citigroup, which grew from Walter Wristons Citibank, will, of course, still have other financial products to cross-sell, but without life insurance, the foundation of most financial plans, it will no longer be a supermarket.

The overriding consensus of these four leaders, who are now marching to a different drummer, is that they wish to concentrate on their core products and services. Or, as the old bromide goes, “tis best to stick to your own knitting.”

Reproduced from National Underwriter Edition, February 25, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.