Thoughts

Who Says You Can’t Talk Product in Social Media?

Posted by Mike McLaughlin on Jun 20, 2012, in Thoughts , tagged with , ,

“Anything but product.”

That’s what a client said to us recently as we worked through content options for social media. It’s a point we hear regularly and one that the industry seems to generally believe in, either because of regulatory concerns or because of the potential perception of “pushing product”.

Then there’s this:

A BlackRock Tweet from June 3, 2012.

That was followed by another Tweet on June 10th highlighting BlackRock’s Global Dividend Income Fund. And, in fact, the June 3rd Tweet wasn’t even the first. BlackRock specifically mentioned its LifePath Portfolios back on May 28th.

At the very least, this challenges the widely-held notion that product-specific promotion is an absolute social media no-no. It will be interesting to see if this type of content becomes more common moving forward.

Client Quotes: The Pace of Digital Change

Posted by Mike McLaughlin on Jun 07, 2012, in Thoughts , tagged with , , , ,

In almost every client meeting I hear something memorable. It’s usually something funny, because my brain retains that stuff better. But it’s also always something that reinforces an important idea for me.

Still a dominant force, and a reminder that digital change happens slowly.

This week I heard two things that reminded me just how far our industry has to go when it comes to digital strategy and execution. Every day we hear about a new cutting-edge mobile initiative, or another firm expanding its social media presence, or a unique piece of content.

We hear less on the reality that in many ways the digital evolution is a slow one. Here are two client quotes from last week that hammer that home:

1. “When terrorists send a threat, they don’t do it via PDF.”

This got a big laugh from me. It was a moment of stand-up comedy in an otherwise serious discussion. In this case, the client was lamenting his firm’s struggle to produce compelling output in light of video’s immense impact on how people communicate memorable messages.

The fact is that the industry has gotten markedly better in using video, specifically by:

  • Mixing multimedia content in alongside traditional printed material
  • Keeping videos short, given viewers’ attention spans are at all-time lows
  • Finding the sweet spot among production quality, production speed, and cost

Even so, there’s an entrenched printed material legacy, and clients still prefer the printed option to multimedia in many cases. Video may have killed the radio star, but it hasn’t yet done major damage to the asset management PDF.

2. “I just received the regulatory ‘OK’ for two Tweets I posted in December.”

/re-checks calendar

Ouch.

We recently wrote a piece about the barriers to social media implementation (subscription) for Ignites. We didn’t delve into the issue of regulation if only because it’s so well-established as THE major contingency in many firms’ social media strategies.

That said, we have two active social media projects right now, and this client hammered home the potential negative impact of regulation. Not only do the rules need to be better crystallized, but the processes do as well.

Six-month waits for approval of 140 characters will put the brakes on some firms’ continued adoption of social media.

100% Alternatives in Your Portfolio. Why Not?

Posted by Mike McLaughlin on May 14, 2012, in Thoughts , tagged with , , , , , ,

Third in a series of posts about marketing alternative investment vehicles to financial advisors. Click to read Part I and Part II.

What’s a reasonable allocation to alternative investments within a portfolio? Most everyone agrees “more than 0%” is true. After that? Things get foggy.

For an asset manager marketing alternative vehicles, the allocation issue is important. Not only do many advisors struggle to understand alternatives in the first place, but they also have a lot of uncertainty when it comes to implementation.

I started with a simple review of the allocations firms use in materials that introduce alternatives:

  • BlackRock’s Investing for a New World sets the initial bar at 15%.
  • A Guggeheim (Rydex | SGI) tool implies that the answer is somewhere up to 30%.
  • A similar Altegris tool goes further, showing that a 50% alts allocation may improve results.
  • Raymond James highlights endowments’ 40% allocation to alts, then quickly notes that this is “too high for the majority of individual investors”.

From Raymond James overview of alternative investments.

To complicate things, consider yet another tool offered by Hatteras Funds, and what happens if you select a portfolio that is 100% alternatives (the Model Portfolio below):

In this tool from Hatteras, a 100%-alternative portfolio provides the best results.

Now an appropriate answer for allocating to alternative strategies is not just 15%, 30%, or even 50%. Here, a portfolio of 100% alts is the right choice. Confronted with this, advisors or investors are asking: what should I do?

Clearly there’s a lack of consensus. By itself, this lack of consensus is no big deal. After all, the goal isn’t for all firms to have the same perspective on alternative allocations.

The real problem is that firms only provide allocation guidelines implicitly. In the examples above, no rationale or explanation accompanies the percentages of assets that can (or should be) invested in alts. The data does the talking, and it gives a pretty vague (“more than 0%”) message.

I see two paths for firms in resolving this issue:

  • Punt on allocation, making it clear that alts have a role and the advisor is in the best position to decide what exposure is best for clients.
  • Build a concrete case for a baseline allocation, including the necessary caveats that one-size-does-NOT-fit-all.

Either approach can work, with the key being that the messaging is explicit. Not only will this close a confusing gap in alternatives marketing, but it will help make it clear that providers have a strong grasp on how their products should be deployed.

Marketing Alternatives: The Importance of Education (Part II)

Posted by Mike McLaughlin on Apr 11, 2012, in Thoughts , tagged with , ,

Second in a series of posts about marketing alternative investment vehicles to financial advisors. Check out the first post here.

Last week I made the case for why educating advisors needs to be a focus for any investment manager attempting to market alternative investments.

Today I’ll make the case that I was wrong. And I’ll start, again, with a graphic:

from Rydex | SGI via getalts.com

The above is from Rydex | SGI’s getalts.com, and it communicates a nearly-identical message to the one from Natixis I referenced last week. Namely, that alternatives can enhance portfolio returns while reducing volatility.

This story sheds light on a major reason not to expend a lot of effort on educating advisors about alternatives: everyone is broadcasting a similar message. While often viewed as table stakes in messaging alternatives, the fact is that it’s very tough to stand out when it comes to the basic “Why Alternatives?” conversation.

Besides sameness, two other reasons support focusing efforts away from education:

  • Distribution partners will get more picky. Yes, distributors need help educating their FAs, but they’re also seeing an influx of similar materials. We’ve had a few managers tell us they’ve gotten lukewarm responses to educational offerings. I think that’s in part because there are many already out there. Not every firm can be a go-to resource for informing advisors.
  • Usage of alternatives is concentrated. This is the exact same statement I used to justify including education as a core marketing component – because so many FAs are dabblers. The converse, and also valid, view holds that there’s no point in focusing on the dabblers. Instead, flows to alternatives will come primarily from the 10-20% of FAs who are heavy users, at least for a while. And they are the ones that don’t need the education.

Given that most firms have limited marketing resources and a finite slice of advisors’ attention, it’s perfectly justifiable to focus on the proprietary aspects (e.g., firm, strategy specifics) of the alternative story at the expense of educational content.

Ultimately the importance of education when it comes to marketing alternative vehicles presents a tricky situation for firms. In the next post, I’ll address the mixed messages being provided on how alternatives should be used in clients’ portfolios.

Marketing Alternatives: The Importance of Education (Part I)

Posted by Mike McLaughlin on Apr 05, 2012, in Thoughts , tagged with , ,

First in a series of posts about marketing alternative investment vehicles to financial advisors.

My guess is that the graphic below is (conceptually, if not specifically) familiar to most investment management marketers:

from Natixis Global Asset Management via AdvisorPerspectives.com.

It’s a concise, data-driven way to illustrate the potential benefits of incorporating alternatives into portfolios, namely that alts can:

  • Enhance returns,
  • Reduce volatility, and
  • Improve downside protection

With $120+ billion in assets across nearly 350 mutual funds, the alternative push into the mainstream, specifically aimed at advisors, continues. And this type of educational content has become pervasive. The risk/return angle is often complemented by:

  • An introduction to the types of alternative investments
  • The importance of extending traditional asset class and strategy diversification

So let’s say you’re charged with marketing new alternative products. How important is selling and educating advisors on alternatives as an asset class? Should you expend significant effort on information that isn’t directly tied to your specific vehicle? How much education is necessary?

I see this is one of the toughest issues in marketing alternatives. The rationale for including educational content has three key points of support:

  • Education provides context. The why and how for including long-only, US large cap strategies in portfolios are fully-ingrained in advisors. But that same information is NOT secondhand knowledge for many FAs when it comes to alternatives.
  • Distributors want it. Large broker-dealers in particular have been asking for educational support for years. They realize it’s a long, effort-intensive process to get their advisors up to speed on how to effectively incorporate alternatives. And they’re more than happy to share that responsibility.
  • Most advisors are dabblers. According to Cogent Research, almost 80% of advisors use some type of alternative product. However, only 15% of FAs allocate more than 15% of client assets to alts. That means many advisors are simply dabblers at this stage, in part because they lack a complete grasp of how alts should be used.

Together I think those points form a strong case. And most firms agree, given their inclusion of educational content in alternative product marketing. That said, if I was launching a new product tomorrow, I’d at least consider skipping over the educational component in my marketing.

I’ll get to why that is next week.