Author: Mike McLaughlin

The Last Podcast Post We Need to Write

Posted by Mike McLaughlin on Dec 04, 2016, in Thoughts , tagged with JPMorgan, podcasts

The macro picture surrounding podcasts is pretty astounding. There are now hundreds of thousands of podcasts globally with total downloads now over a billion. On a monthly basis more than 1 in 5 US adults listens to at least one.^[1]

This penetration has kept podcasts on the radar of the industry’s Marketing teams for years. And while I understand that inclination, I think it’s about time to admit that the industry as a whole has been unsuccessful in leveraging podcasts as a client engagement tool.

First, consider current deployment. I indexed the 20 largest firms via a simple question: does the firm have an active podcast that can be found on iTunes? Note that I excluded firms with a significant direct channel (e.g., Vanguard and Fidelity) and defined “active” (generously) as having published at least once in the past 6 months.

The answer turns out to be 2. Or really 1.5, because one of those is Goldman Sachs, which produces a regular podcast that is frequently unrelated to its asset management business. If you exclude them, you’re left with JPMorgan who in 2016 has produced:

24 audio podcasts ranging from 7 – 42 minutes, primarily focusing on insight from David Kelly
24 video podcasts that run the gamut from short marketing messages to video commentary

Two other top 20 firms published and abandoned podcasts over the course of the past year. It’s pretty clear to me that podcasts fall short as a useful marketing tool for asset managers, and I see two simple reasons why:

Heavily Scripted Content is Boring: Podcasting is, generally, a platform that thrives on the energy and interactivity of the hosts. Within our industry, however, it’s easy to tell almost immediately that there’s an iron-clad script driving the conversation. The energy of a legitimate give-and-take or engaging monologue is all but absent.
The Lack of Visuals is a Disadvantage: Discussing the markets and investments is typically data-intensive. Data-intensive conversations are best supported at least in part by visuals (graphs, charts, tables, etc.), none of which translate to an audio-only medium. Therefore an asset management podcast is usually mentally taxing to track.

So it is time to give up on podcasting? I do believe that the best answer is a simple YES. However, for those still inclined to pursue it, there are two avenues to consider:

Focus on Non-Investment Content: Hands-down the best industry podcast I’ve listened to is this JPMorgan episode on the spending habits of retirement plan participants. Unburdened by the careful avoidance of investment recommendations, the two hosts are actually able to have a real conversation that includes banter and personality. It strikes me that broader value-add is a better opportunity than hard-hitting investment insight.
Consider a Brand-Building Approach: Prudential produces a paid podcast via Slate as part of a broader marketing effort. While not a perfect analogy for intermediary-focused asset managers, the Prudential effort points to the potential feasibility of leveraging sponsorship and the $35 million podcasting advertising market^[2] as a means to build overall brand awareness. This has some appeal at a time when many firms are at least thinking about how to strengthen their images among individual investors.

I value a contrarian perspective as much as anyone, but aside from the two just-noted considerations I think the industry can leave the “opportunity” of podcasting alone.

A Sea of Sameness: Marketing Multi-Asset Class Solutions

Posted by Mike McLaughlin on Dec 04, 2016, in Thoughts , tagged with multi-asset class solutions, positioning, product

In recent years survey after survey has shown that both asset managers and institutions alike anticipate significant growth in multi-asset class solutions (MACS). BlackRock has projected MACS to account for 25% of net new business within five years. It’s no surprise, then, that more and more firms (FundFire login required) are investing in their MACS businesses.

However, one element that appears to not be getting enough focus from the industry is the actual positioning and messaging of MACS. So I dissected how 11 high-profile providers initially introduce their capabilities. The result? Differentiated messaging is almost non-existent.

The goal was not to be exhaustive in analyzing the stories, nor to dig through tertiary details, but instead to catalogue the central elements. The sameness across the firms became apparent quickly:

Despite the perceived opportunity, firms repeatedly fall back on consistent elements in messaging MACS. Trumpeting a collaborative process, a focus on client needs, or the size of the investment team does very little to distance one firm from the next.

Of course there are exceptions. For example, two of the firms provide strong specificity on risk management up-front in presenting MACS. But they are the exceptions. And so while there is a major opportunity to pursue with MACS, thus far the marketing does little to reflect that.

Is Originality Important When it Comes to Content?

Posted by Mike McLaughlin on Oct 18, 2016, in Thoughts , tagged with active management, content management, social media

Three semi-quick steps to get to my answer…

1. I tweet very infrequently.

2. The reasons I don’t tweet are multiple and common. But one of them is relevant to the question at hand: I don’t want to say something or make an observation that has already been made thousands of times before.

Case in point: my tolerance for spicy food has grown with age. So, as part of a recent Thai food order I upped the spiciness. Before the food arrived I started to wonder how I’d react to it. My thought process quickly went:

spicy-flow-chart

At this point I had a few version of a “spicy / Ark of the Covenant” tweet in my head. Still, as I considered putting it out there one thought popped into my head: has somebody said this before?

3. I assumed the answer to my question was YES, but a quick search showed that instinct to be mostly incorrect. It’s only appeared a handful of times over the years (at least on Twitter). Even so, my hesitation got the best of me and the world was deprived of another tweet.

All of this made me wonder about the importance of content originality within asset management. And in a nutshell I came to conclusion that it’s just not very important at all. The most direct illustration I can point to is the defense of active management. Consider that:

The current environment has led many, many, many, many firms to communicate a case for actively-managed investments.
These cases overlap significantly, making highly-similar points.

Despite the ubiquity and similarity we have been working with a client this month on how to message active management. And I think our client is absolutely right to pursue this effort. Why? First, it boils down to a numbers game:

Asset management is fractured, in that there are large numbers of providers and a huge number of clients.
This leads to kinetic content consumption. The likelihood of any given client encountering and consuming a single piece of content from an asset manager is low. The likelihood that they will consume content on the same subject from multiple managers is even lower. In other words, content sameness has a limited chance of being noticed.

Second, multiple perspectives are sought out by thoughtful clients. So, even if someone encounters the same ideas from multiple firms, minor nuances can stand out and be memorable.

And finally, going down heavily-traveled content roads is necessary because clients expect a firm to have something to say. For example, what active manager can afford NOT to have a strong case for active management in today’s climate? Ditto meaningful topics like Brexit, the Fed’s plans for rates, and more.

In an era where firms compete not only on product and performance but on the scale and quality of their ideas, covering the most important ideas and topics is crucial while pure originality is simply a nice-to-have.

“Small Data” is Becoming a Potentially Bigger Problem

Posted by Mike McLaughlin on Oct 18, 2016, in Thoughts , tagged with American Funds, performance, small data

“There are three kinds of lies: lies, damned lies, and statistics.” – Unknown

What do you see when you react to the following chart from American Funds?

At first glance the title and bar charts do their jobs. The likely reaction from most readers is probably along the lines of it looks like the majority of American Funds’ mutual funds have done a good job beating their indexes. Point made.

But, someone (like me) might linger on the chart for a few extra seconds, leading some questions to come to mind:

What are “equity-focused” funds? Is the data set not just pure equity funds?
Is the data gross or net of fees? If gross, how does that impact the results?
Why is the “recent” track record defined as 10 years?

Here’s one more example that leads off a different American Funds piece supporting active management:

Again, a cursory look gives a clear initial takeaway. A bit more consideration, however, can trigger a few more questions:

How were the specific thresholds for defining “Select Active” funds determined?
Is the data gross or net of fees? (Yes, this question is essentially ubiquitous.)
Why is only US Large Cap Equity included? How does the data vary for other categories?

These questions are the result of what I’ll call the industry’s “small data” issue. Small data is the information that asset managers use to support their ideas and research. It is the ever-present backbone of the countless arguments making the cases for asset classes, factors, specific mutual funds, and more.

The problem with small data is two-fold:

The parameters and decision-making processes surrounding it are often unclear, even if someone willingly roots around the disclosures.
There is no uniformity in the construction and use of small data between firms or even within a single firm.

Limited consistency and transparency on the context, definition, and presentation of small data can foster questions and skepticism. I (unscientifically) wonder if firms are unintentionally making it easier for people to doubt what they see or view such data as wholly self-serving, especially given people’s general distrust of marketing messages.

Despite the burden of disclosure, the use of small data makes me think firms might benefit from a more overt approach to communicating the context around the data they present. Clear, prominent, and consistent presentation of the key parameters and rationale for a data set may both reduce potential skepticism of that data and earn firms implicit credit for being up-front with clients.

A To-Do List for Marketing Smart Beta

Posted by Mike McLaughlin on Sep 12, 2016, in Thoughts , tagged with BlackRock, ETFs, Invesco, smart beta

Sound familiar?

A new category of investment products emerges as an attractive alternative to long-established strategies
Asset managers flood the market with product to appeal to the retail (advisor/investor) market
AUM takes off, with highly-optimistic long-term growth projections

Five years ago this was the storyline for liquid alts. And while the story is far from complete and optimism remains in pockets, the last few years have taken some air out of this high-flying balloon.

^{Source: Financial Times}

The path of liquid alts comes to mind based on the explosion of attention, products, and assets in smart beta. An ETF.com survey showed that 99% of advisors expected to maintain or increase smart beta usage in 2016, and BlackRock recently projected smart beta AUM to nearly quadruple by 2020.

The industry has gotten off to a strong start in marketing smart beta to retail audiences. Education is a central element, and firms have made good progress:

Establishing ‘smart beta’ as a baseline term, then using proprietary terminology to support proprietary offerings
Utilizing similar nomenclature and definitions for key factors (e.g., value, momentum, low volatility, etc.)
Differentiating smart beta strategies in general from traditional active and passive

Of course there is a long way to go with marketing just one of the myriad factors that will impact the long-run success of the category. So what areas represent the next opportunities for improving the retail marketing of smart beta? I see three:

1. Providing Market Context

Once the definition of the underlying components of smart beta are understood, the next step lies in helping advisors and investors understand the context surrounding factor performance. This is an important topic in part because of how the outcomes associated with individual factors vary over time (i.e., market conditions).

^{Source: Invesco PowerShares}

Much in the way we’ve seen asset managers map mutual funds to investor needs and desired outcomes, firms can begin to provide similar context on different factors and factor combinations (and therefore strategies). Even something as high-level as this table from BlackRock gives an advisor or investor a valuable anchor as they learn about smart beta.

^{Source: BlackRock}

The need for context relates directly to the next messaging opportunity – implementation.

2. Addressing Implementation

Where some progress has been made in putting context around the different approaches to smart beta, firms have been less successful in communicating how smart beta should be integrated into existing portfolios (which is actually something often done well on the institutional side). With liquid alts, most firms started with a simple message that referenced:

Improving diversification (via assets not correlated with traditional stocks and bonds)
Targeting a specific (and modest) allocation

A straightforward analog with smart beta is largely missing, and some of the concepts used today are likely too complex for much of the retail market.

^{Source: BlackRock}

Crafting a digestible, clear message on how to apply smart beta will help firms capitalize on the current wave of interest and assets.

3. Clarifying the Brand

I’ve touched on this before so won’t dwell on it here. And while it obviously doesn’t apply to every firm, the many established firms that have recently entered the ETF and smart beta space face a unique challenge in merging this effort with longstanding brand messaging.

As the lines between passive and active investing continue to blur, there’s an opportunity, or more frankly a need, for individual firms to recast how they want to position themselves in the minds of clients. Branding is a long-run consideration, but one that several firms have largely neglected (or deferred) so far.

^{[ banner image via Stephen Dann ]}