Posted by Mike McLaughlin
on Oct 22, 2010,
in
Thoughts
, tagged with
BlackRock,
Columbia Threadneedle,
DWS,
fees,
Invesco,
mutual funds,
OppenheimerFunds,
State Street,
Vanguard
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…
