Ameriprise: What is in a name? A powerful brand

Star Tribune, October 3, 2005, by Thomas Lee

As Ameriprise Financial Inc. embarks today on its new life as an independent company, it must overcome this marketing conundrum: How closely should the financial services firm associate itself with the parent company that no longer wants it?

That parent company is, of course, American Express Co., which decided to spin off its financial services unit to AmEx shareholders and focus on its faster growing and more profitable credit card and travel businesses. While it would be easy to say the two companies should go their separate ways, American Express has something of particular value to Ameriprise -- a venerable brand name that establishes instant credibility in the minds of consumers.

"American Express is a very powerful brand," said Kim Sharan, Ameriprise's chief marketing officer. "It's extremely important that we use it. But ultimately, we have to build our own brand."

Ironically, the former IDS Financial Services, acquired in 1984 and later renamed American Express Financial Advisors, never took advantage of the American Express brand while it was part of the larger company, Ameriprise CEO Jim Cracchiolo said.

"You would consider us the quiet company," he said in an earlier interview. "When you would speak to many people ... they would say, 'I didn't know American Express has such a large business and you have 10,000 plus advisers around the country and you manage how much money for people?' "

Although the Minneapolis-based unit made tons of cash for American Express, especially during the bull market of the 1990s, "American Express was not able to sell itself as a credible source of financial advice," said Beth Zimmerman, principal and founder of Cerebellas, a market strategy firm in Long Beach, N.Y.

As the bull stock market stumbled in 2000, so did American Express Financial Advisors' contribution to its parent's profits. Like a number of other brokerage and investment firms, the business was also hit with several enforcement actions, including a $7.4 million fine to settle charges in New Hampshire that it defrauded customers by paying its advisers incentives to sell in-house mutual funds that were also-rans when it came to performing for investors.

Under pressure to boost AmEx's sagging stock price, CEO Kenneth Chenault decided to spin off the unit, a move that caught even Cracchiolo off-guard.

"I always thought we could use that [relationship] to build a stronger financial services business as a part of AmEx," he said. "I was shocked that the company made that decision."

Marketing experts say such a "negative" spinoff can be problematic for the new company.

To compare, consider McDonald's Corporation's plans to spin off Chipotle. McDonald's plans to keep a majority stake in Chipotle, reflecting the company's confidence in the fast-growing business.

American Express will divest itself of any interest in Ameriprise by giving 100 percent of Ameriprise stock to AmEx shareholders, with one Ameriprise share being awarded for every five AmEx shares held. The shares will begin trading today.

The company faces the difficult task of trying to sell the public a new brand in an industry dominated by big names like Merrill Lynch and Morgan Stanley.

Rival Piper Jaffray Companies faced a much easier situation. When U.S. Bancorp decided to spin off Piper in 2003 just a few years after acquiring the brokerage firm, the company kept the Piper name that it had held for decades before its brief stint as a U.S. Bancorp division.

"Our clients had strong recognition of our name," said Chad Kelly, Piper's marketing chief. "We weren't creating a new brand."

Ameriprise flirted with the idea of going back to the IDS name but ultimately decided too much time had passed since AmEx changed IDS to American Express Financial Advisors in 1995.

Ameriprise needs some kind of relationship to the American Express name until the firm establishes itself, analysts say. It's no coincidence that the Ameriprise name bears some similarity to American Express, much the same way Genworth Financial resembles General Electric, which spun off the insurance unit last year. Ameriprise's compass logo is blue; AmEx's logo is also blue.

Ameriprise "is trading off the more positive equity of the American Express brand," said Zimmerman of Cerebella. Ameriprise needs that familiarity with consumers "to show that you didn't come out of nowhere."

Long known for going after the mass market, Ameriprise now has its sights set on the "mass affluent" -- people with assets of $200,000 to $1 million.

Yet "everyone and their brother is going after the same market," said Steve Chang, a partner in the Chicago consulting firm Prophet.

At the least, the spinoff gives Ameriprise some initial buzz to rise above the din of competitors targeting those same customers, Chang said.

The company is spending $60 million on a rebranding campaign. Through television commercials and print ads, Ameriprise links its transition as an independent company to baby boomers nearing their retirement years.

Just as baby boomers are preparing to reinvent their lives, Ameriprise is reinventing itself, Sharan said.

"A generation as unique as this needs a new generation of personal financial planning," one print ad reads. "We are the personal advisors of Ameriprise Financial. The next generation of American Express Financial Advisors."

"It's just a nicer way to say former American Express" advisers, Sharan said.