Thoughts

What Happens When Big Ideas are Worth Less?

Posted by Mike McLaughlin on Feb 20, 2017, in Thoughts , tagged with innovation, smart beta, strategy

Consider a hypothetical industry:

Competition is intensifying.
Organizations are investing heavily in analytical capabilities, both in terms of people and tools, in an attempt to find a new strategy that will give them an edge.
Unfortunately for the innovators, new ideas and strategies are often quickly digested and leveraged by numerous competitors.

I happen to be talking about baseball, an industry so competitive these days that someone was just sent to prison for 4 years for hacking another team’s data. (Yes, with Spring Training starting I have a little too much baseball on my mind).

But the competitive realities in baseball – and their implications – parallel what is happening in asset management. Competition is rising. Firms continue to search for new business and distribution strategies in part by utilizing Big Data. And the window for firms to capitalize on new ideas is increasingly short.

Smart beta provides a good example. Though the ideas have been around for a long time, for the most part firms did not perceive smart beta as a major opportunity until the last few years. Then, rapidly, there was a pivot. In short order the idea that smart beta is not just a niche but a potential core strategic effort for many firms took hold. Today it’s to the point where there are 800+ smart beta ETFs and mild concerns about it being a “market fad run amok.”

What does this mean for firms? What if your next new idea can be understood and cloned/tweaked by the competition almost immediately?

I think the first obvious step is simple acceptance that this will be reality moving forward. In the parallel baseball universe one writer called this “the devaluation of new ideas.” Firms need to accept that their big ideas are going to get out there faster than they’d like.

The second step is more critical. It involves firms placing a greater emphasis on execution over strategy. Coming up with the idea first matters less; implementing the idea as creatively, uniquely, and efficiently as possible becomes paramount.

While this is somewhat of a broad, abstract concept, I find the notion interesting in light of the varied effort we see invested in strategy definition and innovation across our clients. A shift in an organization or team’s fundamental mindset can have an important impact on approaches to everything from product development to distribution tactics.

ETF Issuers and the Missed Education Opportunity

Posted by Anu Heda on Feb 20, 2017, in Thoughts , tagged with BlackRock, SSGA, Vanguard, WisdomTree

In January, Ignites published a piece titled “AQR Second to Vanguard in Active Flows” (subscription required). The primary points orbit active fund flows. What caught my eye was a link to 2016 passive and active fund flows from Morningstar. From their data, only 6% of passive ETF fund flows ($31.5B) went to issuers outside the top five (Vanguard, BlackRock, SSgA, Fidelity, and DFA). That means 120 ETF issuers split $31.5B (issuer list via etfdb). Seems like a massive issuer group sharing a small slice of the ETF flow pie. What types of products do these issuers provide?

To learn more, I sifted through issuer lists and AUM data. Many of the issuers offer leveraged or inverse ETFs (Direxion, ProFunds) while others have thematic ETFs (GlobalX, VelocityShares). To focus my research, I searched for ETFs with investment strategies classified as “alternatives.” Here’s a list of the top 25 alternatives ETFs (image to the right). Only one comes from BlackRock, SSgA, or Vanguard (it’s from SSgA). To support alternative products, issuers need to educate prospective buyers. That’s basic communication strategy. So, I studied the Web sites of the four firms with the 5 largest alternative ETFs: 2 from IndexIQ (now part of New York Life by way of MainStay), WisdomTree, First Trust, and Hull Capital. None of them highlight education on their homepages or product profiles. Rather, they model their sites off of traditional active managers with promotions of thought leadership (2017 Outlook, anyone?), product, and firm.

I think that’s a massive mistake. Focus on education by answering: what’s an alternative ETF? why should you care? how does it precisely fit into an asset allocation plan?

About Us: The Most Important Copy Nobody Cares About

Posted by Anu Heda on Jan 16, 2017, in Thoughts , tagged with Legg Mason, Morgan Stanley, Neuberger Berman

Building on Mike’s post last month about marketing multi-asset class solutions, I reviewed asset manager’s “About Us” (or “Our Profile”, “Who We Are”, etc.) pages. Personally, I believe these pages (approaches vary from a single-page format to a 3-page section) are valuable and can impact professional buyers positively or negatively.

Anyhow, after reviewing ten firms, my immediate thought: wow, this content is dull!

Nearly all the firm’s pages follow a recipe with key ingredients of history, size/breadth, and high-level capabilities. The pages are full of vapid lines such as ‘We are among the world’s strongest financial firms’.

After my initial reaction, I started to wonder why this occurs. I think there are four reasons (not mutually exclusive).

First, there’s significant desire from many Marketing teams to shift to timeless or evergreen content versus timely, knowing the resources and effort timely content requires. I see the value in timeless content for certain topics, such as investor education. I understand and empathize with the thinking: we need to have fewer pieces to update so we can get our position on 2017 Muni Bonds out there fast. I think making the About Us absolutely evergreen leads to writing devoid of any business updates (e.g., acquisitions, new regions) and caps a firm’s ability to differentiate.

Second, everyone internally has a say on the About Us pages (just like everyone has an opinion on brand refreshes) and nobody wants to burn bridges by overly focusing on one channel or set of capabilities, leaving others to feel subjugated. But that all-children-are-equal approach is rarely true. Writing to a least offensive (internally) denominator is good office politics that leads to dull, high-level writing.

Third, writing interesting About Us pages is difficult. We’re in an industry with narrow differences between competitors and few firm story levers to pull. That combination challenges even the most earnest marketer to create something engaging. The simple issue of difficulty shouldn’t dissuade the marketer charged with creating compelling (potentially evergreen even) writing. Yet, rarely have I seen someone internally challenged and rewarded for creating high-quality About Us pages. It can be done but needs prioritization and prominence.

Fourth, site metrics will show how few page views About Us receives (relative to a high-yield bond strategy profile for sure) so why bother? I don’t think all page views are equal, however, so the raw metrics argument always sounds specious. As stated initially, About Us pages can impact prospective buyers and current clients.

Personally, I think Neuberger Berman did an effective About Us upgrade recently. Their About Us quickly lists the firm’s support points providing the user with clear copy related to each point. Additionally, the user can quickly access firm data (AUM, investment professionals, etc.) and link to other sections of the Web site.

Upgrading the About Us section dovetails nicely with overall brand design work. Next time there’s an effort related to the firm’s brand, consider devoting resources to the About Us.

2017 Outlooks are like Snowflakes

Posted by Anu Heda on Jan 16, 2017, in Best Blogs of the Week, Thoughts , tagged with AB, American Century, BlackRock, MandG, TIAA

The industry’s blogs are currently awash in two post types: the year in review (2016) and outlooks (for 2017). I reviewed a dozen (list here; PDF) 2017 outlooks posted over the last four weeks. No two posts are alike. The lack of any standardization in tone, length, and type of prediction is informative in its own right. For a time-strapped FA, I can clearly see why he/she may gravitate to same 2 – 3 firms known from years past.

Three interesting takeaways about outlooks:

There’s nearly no overlap across firms. I expected to see significant topical commonality, such as 50%+ offering an end-of-year target for the S&P 500. Not the case.
Two firms use “2017 Outlook” in the post’s title and offer no predictions. I think the typical reader sees that title and expects some amount of prognostication.
Many firms do not provide clear predictions and include a tremendous volume of “may see” and “could occur” woven into the text. This may be compliance related for some firms, though others (e.g., AB, BlackRock) are comfortable with their investment professionals writing predictions.

Across the 12 firms, I counted 28 predictions (my threshold: need a definitive statement or graphic related to a 2017 prediction). The BlackRock post had the most (6) and the average was 2.3 predictions/post. In case you’re curious of some differences, here are four examples how firms provide predictions.

AB – Says it with a chart. (chart too large to include)

American Century – Casts winners and losers. “And the Potential Winners Are… Regional banks with commercial loan exposure could benefit from rising inflation expectations and a steeper yield curve.”

M & G – Makes it relative to a geography or asset class. “Brazil will not be the outperformer in 2017 as existing valuations are priced for a perfect execution of policy.”

TIAA – Uses Straight-talk and blunt languge. “The rise in the U.S. dollar pauses even if rates move higher.”

Three (Industry-Relevant) Marketing Trends for 2017

Posted by Mike McLaughlin on Jan 15, 2017, in Thoughts , tagged with advertising, content management, predictions, video

Predictions are an interest of mine and of course this time of year there are predictions everywhere about everything. Over the past few weeks I’ve digested more articles about marketing trends than I care to admit. The writing tends to be aggressive and the ideas are all over the place, ranging from better content to Snapchat to optimizing Web sites for Echo and Home voice-triggered searches.

Of course articles tailored to asset management are hard to come by. So after digesting all of these predictions, I thought to highlight the most common ones with potential (or ongoing) relevance to our industry. I ended up with three, so let’s count them down:

3. Mobile

Mobile remains important for well-known reasons, namely the continued growth of mobile Web traffic and search providers’ prioritization of mobile-friendly sites and results.

So what’s relevant for asset managers? Firms know the value of a responsive Web site. However, client-facing mobile apps have largely been a difficult obstacle. You can certainly count me as a skeptic as far as the opportunity to engage advisors and institutions via apps, especially when those apps typically do little but repackage information already available on the site.

But successful apps (outside the industry) deliver a better user experience and attract stickier usage than good Web sites. In addition, Google now offers app indexing. While I don’t think we’ll see any significant progress with client-facing apps in the near future, I do expect that they’ll remain a periodic topic of conversation with firms hoping to figure out a way to deploy them effectively.

2. Native Advertising

Ad blocking, increased competition on social media platforms and other factors are making it more challenging for traditional ads to get through and attract attention. Already a major factor with diverse execution methods, some project native advertising will make up nearly three-quarters of US ad revenue within five years.

So what’s relevant for asset managers? Developing compelling content and messaging has been an industry focal point for a while now. Marketing teams now find themselves at a point where creativity in promotion and placement is at least as important as creating the content / message itself.

Adoption of native advertising has been gradual within asset management. Given the intensity of the competition today, it seems that now is the time for it to accelerate.

1. Video

Ah, a topic that we’ve been talking about since the day Naissance began. The continued importance of video was a mainstay of almost every predictions piece I read. More content, more ads, more live streaming… all supported by an army of statistics on why video is so effective.

So what’s interesting for asset managers? I am actually a little stumped. On the one hand, video came up in no fewer than 5 client meetings last month. It’s on a lot of firms’ radars.

On the other hand I’ve already gone on record with why I think video isn’t done all that well across the industry. And if you exclude entertainment there’s still solid evidence that people prefer reading to watching.

Video ads certainly are an opportunity. But unless we see firms venture down the live streaming path or get creative in terms of presentation and format, this is one trend where I expect less interesting progress.