Thoughts

Aim for Simpler Value-Added Offerings

Posted by Mike McLaughlin on Sep 30, 2010, in Thoughts , tagged with , ,

For fund and insurance marketers funneling products through intermediaries, value-added programs present a classic “damned-if-you-do, damned-if-you-don’t” situation:

  • If You Do: Developing and deploying value-added offerings comes with a big expense and, unfortunately, frequently limited uptake.
  • If You Don’t: A lack of value-added offerings means a potential competitive disadvantage and the dangerous appearance of being less-than-committed to help advisors/producers.

So what do we do? Think smaller.

I think part of the problem is that the value-added aspirations of fund and insurance companies are too grandiose.  For example, we worked with a top financial advisor this summer:  15+ years of experience, $100M+ in AUM.  Among the things we did, the one that made him happiest was the reinvention of his client materials.

Take, for example, the previous one-page annual review summary (PDF) he used for a $5M+ client*:

Original review template. Click to view PDF.

Then consider the updated version (PDF) we provided*:

Updated review template. Click to view PDF.

The use of graphics and clean presentation clearly provides an improvement over the original version.  In short order we gave the advisor a template to use as part of the basis of important conversations with his 100+ clients.

Of course there are compliance challenges when it comes to client-ready materials.  Even so, many everyday challenges facing financial advisors and insurance producers require relatively simple, straightforward solutions.

So instead of devising a robust, complex program for segmenting client bases, why not focus on simple tools to support the annual review process or offer 5 concise ideas for developing a good introductory presentation?  Doing so gives solutions to very common problems.  More importantly, this approach fits with the nature of advisors and producers, who usually want quick-wins, not long conversations, from product providers.

The point is:  mutual fund and insurance companies can be much more successful with value-added offerings by thinking simple.

* Sample data used.  Naissance branding used in place of client branding.

Does Focusing on Performance Ever Help Fund Marketers?

Posted by Mike McLaughlin on Sep 26, 2010, in Thoughts , tagged with ,

I recently listened to a webcast with the head of a prominent mid-size fund family.  At one point during the discussion, a slide appeared with performance data on two of the firm’s funds.  A generic version appears below:

First off, the data presented looks great.  The 10-year performance of both funds is fantastic.  The problem lies in what happens after the table is digested.  Smart investors/advisors/instittutions start to ask questions like:

  • How did the funds do during other intervals (1 yr, 3 yr, etc.)?
  • How has the fund performed since inception?
  • How has the fund performed against its peers?

In this case, the firm’s Web site answers some, but not all, of these questions.  Of course representation of performance is tightly regulated, but many firms still have room to grow when it comes to balancing:

  • The message that puts the fund in the best possible light (e.g., the 10-yr data above)
  • Complete, customizable performance data for all timeframes
  • Full transparency against benchmarks and competitive products

This makes me wonder:  is leading with fund performance, even when it’s strong, ever a good thing? Or does it instead result in a slew of questions intended to shoot holes in the data that’s presented?

I don’t think the answer is an absolute yes or no, but it’s increasingly common to look for a catch in marketing material that highlights performance, especially when the source has a vested interest in making a product look good.  And while I’m not saying performance should be ignored, marketers do need to consider using performance only as a supporting character in a product’s story.

The Biggest Gap Between the Home Office and the Field is Marketing

Posted by Mike McLaughlin on Sep 26, 2010, in Thoughts , tagged with ,

Ask an insurance producer about marketing.  Whether it’s a top producer or a newbie, the most common responses are:

  • A blank stare
  • An admission of cluelessness when it comes to creating/executing a marketing strategy
  • Ignorance of or frustration at the home office’s ability to help producers market themselves

Next, ask the marketing team in the home office about the support they provide to producers.  You’ll hear about the myriad resources available, including a slew of one-off programs and materials designed to help producers engage everyone from retiring CEOs to female small business owners.  And you’ll also hear the same frustration about producers’ inability to take advantage of these resources and execute a good marketing strategy.

This is a big problem.  After spending nearly three months this year immersed in the practices of 40+ producers and talking with 25 home office execs, I think marketing represents the biggest gap between the home office and the field.

Consider this progression of what are, to me, true statements:

  • Home offices produce solid marketing materials.
  • Home offices promote these resources, albeit in mostly nondescript fashion (e-mail, Web site postings, etc.)
  • Producers lack the time, ability, and support to effectively navigate and understand all of the marketing resources available to them.

The results?

  • Marketing resources remain underutilized.
  • Producers continue to be lousy marketers.
  • Everyone is frustrated.

Changing the behavior of thousands of producers seems unlikely.  So fixing this requires a different approach from the home office.  Specifically, the marketing team needs to find a way to focus less on materials, messages, and programs, and more on direct, in-person hand-holding and coaching for producers.

While this oversimplifies, what if an insurance company:

  • Slashes spending on developing/producing materials by $500k.
  • Uses the savings to hire 3 full-time marketing consultants.
  • Has the consultants meet with 200-300 producers twice each year to devise a marketing plan.

The point is, I think the home office, and specifically the marketing team, needs to be a lot more hands-on.  And while it’s not the most scalable of approaches, it seems like the best way to change marketing from a source of confusion and frustration to a more valuable asset to producers.

Improve Your Pitch Book

Posted by Anu Heda on Sep 26, 2010, in Thoughts

Here are five easy improvements every startup or small hedge fund can consider to improve the pitch book. They require no investment beyond time and concentration.

Bring the investment team front and center

+ Hedge Funds are trading on the portfolio managers’ ability to make money.  Great pitch books make the managers look credible, innovative, and trustworthy.  Pitch books should begin that process by page 2.

Have a one-sentence objective that (a) engages the reader & (b) differentiates from other hedge funds

+ We see “provide a non-correlated investment that strives to maximize medium-term returns” by the dozen.  Many prospective investors will ask “who doesn’t do that?”  And with 10,000+ hedge fund options, we can’t blame them for asking that question.

Be consistent throughout your pitch book

+ Too many times, the fund’s objective changes throughout the pitch books. The objective written on page 2 differs from the fund’s objective on page 10.  Write one interesting objective and stick with it.  The same goes for mission and team.

Avoid stock photo

+ Compass, lighthouse, chess board, executives shaking hands.  We see these images repeatedly.  At best, they’re ignored.  At worst, they break the continuity and flow within a document.  They are always corny.

Avoid anything smaller than 12-point font

+ Many hedge funds try a “blind them with science” approach.  By that, I mean each page is dense with data, statistics, and bullet points.  Readers appreciate pitch books where each slide introduces a single important idea with supporting points.

We like to help firms go beyond the basics; if you’re interested, please contact us and we’ll set up time for discuss.

Discussing ETFs, even when you do not offer any

Posted by Anu Heda on Sep 26, 2010, in Thoughts

Investment managers without exchange-traded fund (ETF) portfolios can improve their net assets by acknowledging why ETFs may not be the right investment for advisors to use in client portfolios.

This came to mind earlier this month; The Wall Street Journal wrote about increased ETF use by fee-based advisors (see article).  Tom Lydon writes, “For fee-based advisers, ETFs are a perfect tool to dictate asset allocation.”  My expertise isn’t to confirm or reject his asset allocation hypothesis, rather consider the implications for selling & marketing mutual funds.

So if the following are true:

  1. ETFs sales are growing and will continue to do so. (source from 2008)
  2. ETFs are perfect for asset allocation in a fee-based service. (assumed from above)
  3. Number of fee-based advisors will grow and commission-based advisors will decline. (Tiburon found a 40% increase in fee-based advisors between 2005-2009)

That raised a question in my mind – do mutual fund providers market against ETFs? ETF providers certainly position themselves against mutual funds. The two ETF titans, iShares and Vanguard, provide entire micro-sites to “why consider ETFs versus mutual funds.”  iShares even clarifies tax efficiencies.

My next logical step was to visit the Web sites of top mutual fund firms primarily focused on serving financial advisors.  In visiting five Web sites (public sites only), I didn’t see any “why consider our funds versus ETFs?” type language.  Why?  I may guess:

  • Mutual Fund providers do not see ETFs as a reasonable threat.
  • Those firms think all advisors know “why.”
  • These firms haven’t prioritized answering this question.

Competing against ETFs is increasingly becoming a priority.  I can see a well-executed marketing program – promoting mutual funds (passive or active) versus ETFs (supported with Sales efforts) improving a firm’s competitive position and net assets.  Today, the media is leading investor communications with reasons to potentially avoid ETFs, such as over-specialization.