Historically, demonstrating the quantifiable value of brand building and marketing efforts has been a challenge, often treated as a cost rather than an investment in valuable assets. But the people who care most about numbers – the investors – are asking for the very proof marketers have always wanted to share.
A CFA Institute Research & Policy Center report titled “Investor Perspectives: Intangible Assets Before Recognition, Improved Disclosures and Disaggregation Are Needed” provides the investor point of view.
The invisible value problem
“Remember that reputation and integrity are your most valuable assets—and can be lost in a heartbeat.” This is one of the most famous quotes from Charlie Munger, Warren Buffett’s late business partner. From the opposite perspective, it also means your reputation, if poorly managed, can become a great liability.
The long-term expansion of services in Western economies has contributed to the rising importance of reputation as an asset, with trust being its building block. Canada is no exception.
This changing economic landscape has translated into a growing share of intangibles in balance sheets.
The CFA Institute’s report compared the 10 largest market capitalizations in 1979 and 2023, showing a shift from an energy to a technology dominance. Companies in technology, consumer and health care, with greater intangibles, have seen their weight increase to 60% of the MSCI World Index in 2023 from 49% 10 years earlier.
But here is what accounting rules prevailing today but dating back to the 1970s say:
- If a company buys an intangible (say, a trademark), it appears on the balance sheet.
- If a company builds the same intangible through R&D, branding, or customer acquisition, the expense runs straight through the income statement and vanishes from view.
“Except for a few industries, current balance sheets aren’t that helpful to analysts.” CFA Institute Survey’s investor and analyst comments.
That accounting quirk leaves a yawning gap between book value and market value. Investors believe this failure to recognize and adequately measure internally generated intangibles contributes to financial statements being less relevant in understanding modern companies.
Investors want brand data they can trust
The CFA Institute’s report referring to a 2021 survey makes investors’ priorities clear: improved disclosures and greater disaggregation (details):
- Over 85 % of respondents want better disclosure about intangibles
- 91 % agree that improving disclosures of internally generated intangibles would be beneficial
Investors aren’t clamouring to slap dollar values on home-grown brands or customer lists. Valuing those assets is subjective, and they worry management could game the numbers. Instead, they want data they can trust—granular spending and performance metrics they can analyze themselves.
Show your work, down to the line item
When investors ask for “greater disaggregation,” they’re not looking for glossy sound bites. They want to see, line by line, how much goes into:
- Brand-building campaigns
- Customer acquisition and retention
- Market development initiatives
- R&D programs that create proprietary capabilities.
Consider Apple: it discloses roughly US $29 billion in annual R&D—but offers almost no detail on where that money goes. Investors want that missing detail from companies.
An opportunity for brand teams to demonstrate their strategic value
Brand and marketing teams already track:
- Spend by campaign and channel
- Customer acquisition costs
- Brand-health and engagement scores.
That is exactly the transparency investors are demanding. By partnering with finance and investor-relations colleagues, marketers can finally recast their budgets as asset-building investments – and back it up with numbers.
“ Tell us how you are creating these invisible assets that drive value!” – CFA Survey participant comment.
Beyond the spend: From cost center to value creator
Dollars alone aren’t enough. Effectiveness matters. How do those investments strengthen brand equity, deepen loyalty, or sharpen competitive edge? Translate your raw spend into credible impact metrics investors understand.
The investor community has handed brand teams a clear mandate to surface the numbers that prove branding and marketing, including reputation management, build long-term value.
By providing the detailed information that investors are hungry for – the type and amount of investment in brand building, customer relationships, etc. – brand teams can enhance transparency, demonstrate their strategic value, and potentially become the unexpected “new best friend” of the investor community.
