Thoughts

Big Changes for Family Offices Ahead

Posted by Anu Heda on Nov 01, 2010, in Thoughts

Earlier this week, we visited with numerous family office professionals.  At the breakfast, sponsored by Private Asset Management, an expert panel addressed five critical points.

  1. Mergers are coming – Regulatory improvements will lead to more costs for family offices.  Specifically, the changes within Dodd-Frank will create higher compliance costs and therefore facilitate mergers by consolidating compliance staff.
  2. Purchasing power is paramount – Estate tax changes. Currency devaluations.  Capital gains changes.  All these issues (and more) have dramatic impact on the clients within family offices.  The underlying topic is: how do I maintain purchasing power? For many clients, the wealth enables a lifestyle for numerous trustees.  Those trustees may be in different geographies with mixed interest levels in the financial management of their trusts.  What they all care about is that their purchasing ability doesn’t decrease.
  3. Complex stopped selling – The experts discussed how little appetite their clients have for structured products and other complex investments.  The clients still desire yield but not at any cost.
  4. Transparency – Yes; Unique – No – For the foreseeable future, family offices will push investment managers to provide greater transparency. In a post-Madoff world, they remarked, there is little appetite for unique or opaque investment vehicles.  Post financial crisis, it’s a different world; clients are not spending time bragging about an exotic investment.
  5. Education is crucial – Family offices have the unenviable task of providing significant training to young (and soon-to-be) inheritors.  The inheritors need to learn about tax planning, long-term investment planning and managing foundations.  And a single family may have heirs across five time zones.  It’s complex and nuanced without a straightforward solution.

The underlying desire to maintain wealth and purchasing power are simple to comprehend.  Executing on those desires is very complex and uncertain.

Online Strategy Challenges

Posted by Anu Heda on Oct 28, 2010, in Thoughts , tagged with

“All the things I thought I knew, I’m learning again.”

–          Don Henley

That quote came to mind in a recent discussion with an ex-head of global e-Business.  Over thirty minutes, we discussed the most critical challenges involved with improving an asset manager’s online presence.  We didn’t dwell on technology, budgets, staffing, or politics – though issues in those areas exist.  No doubt: it’s  a tough job.

We focused on two specific challenges.  Rather than recap, I’ll give a suggestion to each challenge.

  • Simplify, simplify, simplify: Naturally, we expect others understand as much as we do.  Time and time again that ruins communications.  This is often true in e-Business.  People rising to senior levels of e-Business have worked with the Web for 10+ years and know about the cutting-edge.  Their peers do not.  I suggest learning your peers’ knowledge levels and appetite for cutting-edge technology before communicating Web strategy and vision.  And most likely there will be numerous levels and appetites.  It can be humbling but effective. This approach means different decks and different communication approaches.
  • Avoid the black box:  Web sites can take a long time to build.  After gathering support and organizational buy-in, the firm may spend up to one year developing the site.  I suggest building a baby-steps approach.  Well-planned, monthly releases are effective.  Seeing progress builds comfort and confidence throughout the company.

While neither is revolutionary, I believe they’re crucial to successfully launching (or re-launching) a Web site and probably for most projects that span different parts of the company.

J. P. Morgan Funds and Stealth Price Marketing

Posted by Mike McLaughlin on Oct 25, 2010, in Thoughts , tagged with , ,

We said three posts but couldn’t resist a quick fourth on price competition.  Click to read Part 1, Part 2, and Part 3.

To close off the series of posts on price competition, an interesting tidbit.  Check out the sponsored links in the Google results for “low cost mutual funds”.*

At the top you’ll see Vanguard, T. Rowe Price, and Fidelity.  No surprises there.   Now look on the right side.  The name that jumps out to me:  J.P. Morgan Funds.  The firm has many competitively-priced offerings, but never before have I seen them overtly market themselves as a low-cost provider.  The sponsored link caught me off-guard.

Looking further, the firm makes no mention of pricing or fees anywhere in the content about the firm on its Web site.  This makes me suspect that J. P. Morgan is doing some “test and learn” when it comes to sponsored links.

However, there’s the possibility that this represents a little stealth, price-centric marketing by J.P. Morgan.  If so, it’s another interesting way to inject price into marketing strategies.

* I repeated the same search 20 times on 10/25/10 and J. P. Morgan Funds appeared in the sponsored links 19 times.  The sponsored results will change over time.



Marketing on Price the American Funds Way

Posted by Mike McLaughlin on Oct 25, 2010, in Thoughts , tagged with , ,

Part 3 in a series of three posts regarding price competition.  Read Part 1 here and Part 2 here.

Last week I argued that there’s an ocean of opportunity for asset managers to integrate price into their marketing efforts.  For a straightforward example of how this can be done effectively, look no further than American Funds, which does three things very nicely:

A simple graph on fees with a strong competitive message.

But we’re not American Funds.  That’s the easy objection.  And true.  But the principles of the approach can be adopted in specific ways that suit each firm.  For most every firm, one of the following is going to be true:

  • Fees or other costs have been reduced, in some cases dramatically, over the past few years.
  • Specific products are relatively inexpensive compared to peers.
  • Specific products have significantly outperformed competitively-priced peers.

Some are always going to be more capable in keeping prices low on a broad scale.  But all firms care about operating efficiently and should have evidence in hand to demonstrate that.  In other words, every firm can make price a part of their value proposition.  It’s up to marketers to identify the best way to do so.

Ignoring Price Means Firms Have to Play Defense

Posted by Mike McLaughlin on Oct 22, 2010, in Thoughts , tagged with , , , , , , , ,

Part 2 in a series of posts regarding price competition.  Read Part 1 here.

In yesterday’s post, I suggested that price is an underutilized tool in mutual fund marketing. That the industry, while very price competitive, rarely makes that competition publicly explicit.  In light of the traditional 4P marketing mix, which Anu used to discuss PIMCO, this is like leaving 25% of the tools in the toolbox.

Of course, at one end of the spectrum you have a firm like Vanguard, where:

  • “Exceptional value”, which includes performance, service, and costs, is highlighted as a core reason to invest with the firm.

  • The words “low cost” appear consistently in marketing messages, including on the homepage of the advisor Web site.

Most every other mutual fund provider sits at the opposite end of the price-marketing spectrum.  In defining who they are, firms like Columbia, Invesco, DWS, Oppenheimer, and myriad others make no mention of fees/pricing/efficiency as part of their overall value proposition.

The danger in passive strategies toward price discussions is that they can eventually force firms to play defense.  Consider the responses of BlackRock and State Street to the recent fee reductions on Vanguard’s ETFs.  The answers are fine, but the discussion has those firms having to defend existing policies.  Without exceptional performance, “why do you charge X when another firm charges Y?” is a question nobody wants.

Introducing price more proactively is a chance for some firms to gain higher ground in marketing against the competition.  And there are subtle ways to do this.  Some tactical ideas to come next week…