Author: Mike McLaughlin

Site Banners: To Rotate or Not to Rotate?

Posted by Mike McLaughlin on Mar 13, 2017, in Thoughts , tagged with banners, homepage, John Hancock, Web sites

We’re working with a client to develop a plan to revitalize their Web sites. In a discussion focused on homepages, a specific topic came up: banners. More specifically, there was a straightforward question: what’s better, static or rotating homepage banners?

It’s a tactical question but an important one given the importance of engaging users via the homepage experience. And while many have personal opinions, let’s start with a simple analysis.

What Does the Industry Do?

First off, almost every firm presents some type of banner, though there are a few exceptions. So I examined the homepages of 20 firms’ advisor sites. Here’s what I saw:

By roughly a 2:1 margin, firms utilize rotating banners. The rotating banners vary in terms of execution; static banners do as well, with approaches roughly evenly split between promoting product and highlighting thought leadership.

Does it Matter?

The effectiveness of any banner depends upon numerous factors – size, visual design, specific text – so there’s no absolute clarity on if a static or rotating approach is categorically better. That said, I think there are two issues that tip the scales toward static presentation:

The Data: if you review all the studies done on the success rates (i.e., clicks, conversions) associated with static v. rotating banners, you’ll get a somewhat mixed picture but one that I’d argue slightly favors static. That, plus the fact that 2^nd/3^rd/4^th panels in a rotating banner generate poor response rates, supports a static approach.
Usability: rotating banners bring some baggage relative to their static counterparts. The motion is distracting; auto-rotation lessens users’ control of the site experience; and timing the rotation can be a tricky proposition (i.e., too fast and users can’t fully digest the message, too slow and they won’t wait for the next message to appear).

Still, this is far from a clear-cut issue or one that is specific to asset management. The same variation in banner delivery is seen in the pharma industry, for example, where the top 10 firms’ sites are evenly split on static v. rotating banners. So while I expect firms will continue to execute differently, it will be interesting to see if a stronger consensus (or an entirely new approach) develops.

PIMCO Makes Changes to BOND

Posted by Mike McLaughlin on Mar 13, 2017, in Thoughts , tagged with ETFs, PIMCO, product, strategy, two more cents

Last week PIMCO announced changes (PDF) to its flagship Total Return active ETF, BOND. The gist: different investment focus to meet changing investor needs, new management team, same ticker.

I had a quick comment in the Ignites story (subscription required) on the change in which another observer stated that the appropriate move for PIMCO in this case is to launch another product, not tweak BOND. I find the move interesting enough that I thought to cover a few more things. So, three points each on two topics:

What’s Important About the Context Surrounding the Change?

BOND is roughly $2 billion in assets. Not to minimize those assets, but they’re small relative to the whole of the Total Return strategy (75B+ in the mutual fund alone) and the firm’s $1.5 trillion in AUM.
In general, active ETFs have not taken off as some have hoped. It’s difficult to project that PIMCO’s changes to BOND put a significant short or mid-term influx of assets at risk.
Positioning the move as being grounded in the changing needs of investors is (a) appealing given the nature of today’s bond market, and (b) credible given that PIMCO is altering a product that has performed well, not poorly.

So Why Might This be Worth Doing?

The Total Return strategy has been on the defensive since the fallout from Bill Gross’s departure. At least for the ETF this move enables PIMCO to focus on client needs and the new (and strong) team as part of a more positive conversation.
Transitioning an existing product avoids adding another active ETF into an already-crowded ETF market and one that (again) has not been overly conducive to active funds.
The scale of the assets involved makes this a potentially-appealing learning exercise from a strategic standpoint. PIMCO can mine the implications of pivoting existing ETF offerings, recasting the messaging for Total Return, and the like. (I realize this is far-fetched but the move has me thinking about adopting the regular reinvention strategy of Chicago’s famous Next restaurant for an ETF.)

There are so many nuances to consider. Even the fact that the ticker symbol is unchanged has implications. After all, if people know only one thing about active ETFs, fixed income ETFs, and PIMCO ETFs, the BOND ticker is probably it. Will the ticker being the same undermine efforts to communicate the changes?

It will be interesting and fun to see how this ultimately plays out.

Can We Make Data More Digestible?

Posted by Mike McLaughlin on Feb 20, 2017, in Thoughts , tagged with Dimensional, fees, Morningstar, small data

25 home runs. 100 runs batted in. A .293 batting average.

Those data points, in part, summarize the 2016 baseball season of Jose Abreu, the best offensive player on my favorite team, the Chicago White Sox. Baseball has undergone a huge statistical revolution over the last 20 years. I chose three very traditional data points for Abreu, but the fact is there are literally hundreds of individual stats tracked for players these days.

All of that data is well and good, but digesting it can lead to a very simple question: just how good was Jose Abreu in 2016? It turns out there’s a clear answer to that question, because one thing baseball has done very well is simplify complex data.

For example, there’s a statistic called Weighted Runs Created Plus, or wRC+. It summarizes a player’s entire offensive value in a single number. Without diving into the technical details, two things make wRC+ very effective:

It adjusts for context. Specifically it adjusts results based on (a) league-wide averages, and (b) the stadium the player plays in (since some are more or less friendly for offense than others).
It summarizes everything in a SINGLE number. A wRC+ value of 100 represents league average. Every point above or below that represents a result that is 1% better or worse than average. So, Abreu’s wRC+ of 118 means he was 18% better than the average offensive player last season.

That’s a lot of baseball… what’s the point? Simply put, I think baseball’s ability to present data in a digestible manner has potential for asset management. Consider expenses as an example. A common presentation is to present expense ratios directly, as Dimensional Fund Advisors does here:

But how much does that really help? Sure knowledgeable investors and advisors have a good notion of what is high or low when it comes to fees, but not in any systematic or (frequently) very precise way.

Providing category or peer data alongside that, as Morningstar and some managers do, certainly helps. But even there an investor or advisor is left to mentally digest the scale of the difference.

So what if data like expense ratios was represented via a more comprehensive statistic that combines product-specific and category-average data into a single number scaled against 100, much like wRC+? Let’s call it the “Expense Index.” For the DFA fund noted above, the Expense Index would be 38, immediately communicating that the fund’s expense ratio is 62% lower than its peer group.

I can envision many applications for this type of normalized data. Of course there are questions. For example, without an external / regulatory requirement would firms want to be so direct, especially with data like fees? I mean, many would want to avoid showing an Expense Index of 150.

So there is some thinking to be done on what information is most conducive to such an approach. Even so, simplifying and providing context around data strikes me as an opportunity worth of more exploration.

What Happens When Big Ideas are Worth Less?

Posted by Mike McLaughlin on Feb 20, 2017, in Thoughts , tagged with innovation, smart beta, strategy

Consider a hypothetical industry:

Competition is intensifying.
Organizations are investing heavily in analytical capabilities, both in terms of people and tools, in an attempt to find a new strategy that will give them an edge.
Unfortunately for the innovators, new ideas and strategies are often quickly digested and leveraged by numerous competitors.

I happen to be talking about baseball, an industry so competitive these days that someone was just sent to prison for 4 years for hacking another team’s data. (Yes, with Spring Training starting I have a little too much baseball on my mind).

But the competitive realities in baseball – and their implications – parallel what is happening in asset management. Competition is rising. Firms continue to search for new business and distribution strategies in part by utilizing Big Data. And the window for firms to capitalize on new ideas is increasingly short.

Smart beta provides a good example. Though the ideas have been around for a long time, for the most part firms did not perceive smart beta as a major opportunity until the last few years. Then, rapidly, there was a pivot. In short order the idea that smart beta is not just a niche but a potential core strategic effort for many firms took hold. Today it’s to the point where there are 800+ smart beta ETFs and mild concerns about it being a “market fad run amok.”

What does this mean for firms? What if your next new idea can be understood and cloned/tweaked by the competition almost immediately?

I think the first obvious step is simple acceptance that this will be reality moving forward. In the parallel baseball universe one writer called this “the devaluation of new ideas.” Firms need to accept that their big ideas are going to get out there faster than they’d like.

The second step is more critical. It involves firms placing a greater emphasis on execution over strategy. Coming up with the idea first matters less; implementing the idea as creatively, uniquely, and efficiently as possible becomes paramount.

While this is somewhat of a broad, abstract concept, I find the notion interesting in light of the varied effort we see invested in strategy definition and innovation across our clients. A shift in an organization or team’s fundamental mindset can have an important impact on approaches to everything from product development to distribution tactics.

Three (Industry-Relevant) Marketing Trends for 2017

Posted by Mike McLaughlin on Jan 15, 2017, in Thoughts , tagged with advertising, content management, predictions, video

Predictions are an interest of mine and of course this time of year there are predictions everywhere about everything. Over the past few weeks I’ve digested more articles about marketing trends than I care to admit. The writing tends to be aggressive and the ideas are all over the place, ranging from better content to Snapchat to optimizing Web sites for Echo and Home voice-triggered searches.

Of course articles tailored to asset management are hard to come by. So after digesting all of these predictions, I thought to highlight the most common ones with potential (or ongoing) relevance to our industry. I ended up with three, so let’s count them down:

3. Mobile

Mobile remains important for well-known reasons, namely the continued growth of mobile Web traffic and search providers’ prioritization of mobile-friendly sites and results.

So what’s relevant for asset managers? Firms know the value of a responsive Web site. However, client-facing mobile apps have largely been a difficult obstacle. You can certainly count me as a skeptic as far as the opportunity to engage advisors and institutions via apps, especially when those apps typically do little but repackage information already available on the site.

But successful apps (outside the industry) deliver a better user experience and attract stickier usage than good Web sites. In addition, Google now offers app indexing. While I don’t think we’ll see any significant progress with client-facing apps in the near future, I do expect that they’ll remain a periodic topic of conversation with firms hoping to figure out a way to deploy them effectively.

2. Native Advertising

Ad blocking, increased competition on social media platforms and other factors are making it more challenging for traditional ads to get through and attract attention. Already a major factor with diverse execution methods, some project native advertising will make up nearly three-quarters of US ad revenue within five years.

So what’s relevant for asset managers? Developing compelling content and messaging has been an industry focal point for a while now. Marketing teams now find themselves at a point where creativity in promotion and placement is at least as important as creating the content / message itself.

Adoption of native advertising has been gradual within asset management. Given the intensity of the competition today, it seems that now is the time for it to accelerate.

1. Video

Ah, a topic that we’ve been talking about since the day Naissance began. The continued importance of video was a mainstay of almost every predictions piece I read. More content, more ads, more live streaming… all supported by an army of statistics on why video is so effective.

So what’s interesting for asset managers? I am actually a little stumped. On the one hand, video came up in no fewer than 5 client meetings last month. It’s on a lot of firms’ radars.

On the other hand I’ve already gone on record with why I think video isn’t done all that well across the industry. And if you exclude entertainment there’s still solid evidence that people prefer reading to watching.

Video ads certainly are an opportunity. But unless we see firms venture down the live streaming path or get creative in terms of presentation and format, this is one trend where I expect less interesting progress.