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Does Focusing on Performance Ever Help Fund Marketers?

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

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

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

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.

Why Naissance Isn’t on Facebook (For Now)

It’s somehow become generally accepted that every business needs a Facebook page.  So, in preparing for the Naissance launch, Googling for arguments why a company shouldn’t be on Facebook seemed like a fun exercise.

After 20 minutes I gave up.  I couldn’t find someone who says “here are 3 good reasons why your company doesn’t need to be on Facebook.”  And yet we arrived at that conclusion.  Here’s why:

  • We’re neither big nor retail. Coca Cola has hundreds of millions of customers, many of whom are actually on Facebook.  They need a page.  We’re a small company with a focused group of businesses as clients.  And from what I can tell, most of the people we meet with haven’t taken the Facebook plunge.
  • We know, already use, and prefer other tools. LinkedIn has become indispensible to us for business networking.  So we’re there (here and here).  Twitter is easy and has been fun for two years.  So we’re there, too.  But neither Anu nor I have found a reason to register for Facebook yet.
  • We need a better reason than “repetition”. We think a Facebook presence should bring something different to the table.  Something that people can’t get on a blog, a Web site, or via LinkedIn or Twitter.  Unfortunately, we don’t know what that should be for Naissance.  And judging by the pages of many companies, we’re not the only ones struggling for an answer.

We only have so many things to say.  And so contrary to the prevailing wisdom, we can live without a Facebook page for now.  We suspect many other companies can, too.