Building and maintaining a brand is just as much a risk management exercise as it is a marketing objective. Our panel discusses how brand links with performance, along with the challenges marketers face in the digital world.
Marcus Bolitho (head of marketing, Old Mutual Global Investors)
James Cardew (global head of marketing, Schroders)
Simon Hildrey (head of marketing & distribution strategy, Liontrust AM)
Diana Mackay (chief executive, Fund Radar/Mackay Williams)
Rob Sanders (head of group marketing, Aberdeen Asset Management)
Funds Europe: Is there a link between the size of a fund manager’s brand and its success as a generator of investment performance?
Diana Mackay, Mackay Williams: Investment performance is what drives fund management; it accounts for probably 50% or more of a brand profile. But the larger the asset management group is, the less able it is to rely on investment performance as a driver of brand. It becomes more important to work on all the other issues that contribute to brand.
A large manager’s differentiator is no longer a single product, or a single area of investment capability. Brand is about the solidity of the group, the breadth of the group and the comfort that comes with its size.
Rob Sanders, Aberdeen: Where there is a link is between a fund manager’s size and its success as an asset gatherer. Evidence shows that assets raised by good performing managers with weak brands, compared to assets raised by weaker performers but with strong brands, are the same. So, in terms of asset raising and retention, brand is essential.
Marcus Bolitho, Old Mutual:Strong investment performance is clearly a great advantage for brand, but you shouldn’t build a brand just on performance, because performance is cyclical. Brands need to be built around more sustainable factors, like core values, culture, service and quality of business.
James Cardew, Schroders: In a battle between equals, the better brand will win. A manager with a strong brand is given more time when performance is suffering or out of cycle.
The better brand is trusted to innovate and is a magnet organisation for talented individuals – and that helps deliver better performance.
Simon Hildrey, Liontrust: Culture is the key to driving investment performance, and that centres on the people. If you recruit good people, you’ll get good performance. Boutiques offer very strong performance and they pride themselves on recruiting good fund managers.
Different environments suit different people. Some fund managers will prefer the larger houses and some will prefer boutiques.
Funds Europe: What are the dominant themes in fund management brand building today?
Bolitho: It’s about shifting away from product messaging, and connecting instead with key themes and needs emerging in the market.
Sanders: Raising brand awareness, beyond just sponsoring something, for us is about raising awareness of Aberdeen as an articulate investment manager that says interesting things about the assets we manage and which understands our clients.
Cardew: Fundamentally, asset management has a problem answering the ‘why we do it’ question. Apple puts technology into people’s life. That’s why it does what it does. The whole trust issue and understanding about what asset managers do just isn’t there compared with other industries. People don’t understand the aims and nature of the business, and so they don’t perceive the value proposition to be strong enough.
Sanders: Yes, and this might be because the industry is strongly intermediated.
Hildrey: I don’t think any asset manager has created a really strong consumer brand. I think most people in the street couldn’t name any.
Yet when I explain what asset managers do – the fact that we’re there to invest in companies and generate savings for people – people are pleasantly surprised, particularly with savings being a key issue, alongside investments.
The brand should be about aspiration.
Sanders: We live in a world where not many end-customers are completely engaged with investment management, yet they are engaged in saving to have enough wealth at a certain point in time. It is a time also when governments in the Western world are starting to withdraw support for people in retirement.
The industry is moving away from manufacturing components for banks and supermarkets, towards instead providing solutions to the end-customer and ring-fencing their assets.
Mackay: The biggest thing driving investors into funds now is zero interest rates. They have to go into funds because they’ve got nowhere else to go. This means asset managers have to start messaging the end consumer about this – and remember that fund selectors need those messages to be consumer-friendly.
Funds Europe: Is brand important to professional fund buyers?
Hildrey: If you believe brand is about the whole culture, environment and people of an investment management company, then absolutely, brand is key to professional fund buying too. It’s not just about your latest advert.
And also, very importantly for providers, if their customer already knows the investment manager’s brand, it makes the adviser’s job a lot easier when recommending a particular firm’s product. There would already be a certain amount of brand trust in place on the part of the customer.
Sanders: Fund selectors need to know your brand in order to understand what you’re about, what you do with their customers’ money and whether you are going to be around in the future. As mentioned, this helps the adviser’s distribution process.
Cardew: I agree, and also because brand may say a lot about a fund manager’s service model – for example, high-touch, high-visibility service with wide access to fund managers and substantial reporting.
Brand is also really important to discretionary advisers because an adviser does not want to have to spend six months researching a business and getting comfortable with it before making an asset allocation. They want to go back to tried-and-tested providers.
Mackay: Interestingly, when it comes to selecting a new provider, brand is the seventh most important criteria. The most important by far is transparency. These factors are of course linked, and it’s a question about how to separate them out. In our research, we ask a very open question about which, other than performance, are the key criteria for selection, and then we scale the answers.
Brand is surprisingly low when it comes to initial selection, although much more important for client-facing advisers, as opposed to discretionary or fund-of-funds. In assessing drivers of business growth once a fund supplier has been selected, brand becomes much more important.
Cardew: Also, as global wealth businesses consolidate into a smaller number of provider firms, they will need providers who can service their clients in a range of countries and regions – and this by default might even push professional fund buyers towards selling bigger brands.
Hildrey: Yet, at the same time, some fund buyers will want some fund managers with lower profiles and more exclusivity. This is because they can then offer their clients something different, something that not everybody else has got.
Sanders: It is true. The portfolio of one of our biggest distributors in Asia is roughly 70% large brand names. But about 30% of the portfolio is made of boutique managers. It lets the distributor tell clients they have found these managers and they have special access to them.
Funds Europe: What are the key risks for a brand? In other words, how can years of brand building be undone in seconds?
Sanders: There are a number of reasons why brands can come undone. There are, of course, the regulatory issues. Being fined will never look good.
But, essentially, for a fund manager, failing to clearly communicate what it is you’re doing with people’s money is a key risk, and for us as marketers, it’s about making people understand what we do as a business with client money.
Hildrey: What affects a brand most can vary by size of company. If it is a boutique and investors are concentrated in a strategy that the boutique is known for, as soon as that strategy falls out of favour the firm can lose a significant number of assets very quickly, and that could affect the brand.
Mackay: Though it shouldn’t necessarily affect it, but yes, it will have a knock-on effect.
Hildrey: Also, for a boutique to lose a fund manager can have a major effect on the whole brand perception very quickly, though this may not be so important at larger houses.
We should also mention social media – this will lead to new risks that we haven’t experienced yet, particularly around reputation – and liquidity risk, where people cannot exit a fund quick enough when they need.
Mackay: We need also to consider the brand of funds itself. A scandal within one fund manager can affect the whole industry. To me, that’s the biggest problem. The industry does not do enough to reinforce the brand of funds.
Funds Europe: What are the biggest challenges for marketing a fund management business in this environment?
Sanders: The insight into our customers from correct data manipulation is a key challenge and I don’t think we, as an industry, have enough customer information to market as effectively as we’d all like to, despite the tools available.
Cardew: The commoditisation of digital technology has meant the tools are becoming much more accessible. About 15 years ago, I looked at a workflow tool that cost about £7 million, and about five years ago a similar thing was about £1 million. We then installed one three years ago for £20,000. So costs have collapsed and there’s potentially going to be an arms race in this use of technology.
But another challenge for marketing is to not market a key fund management individual. That’s where your key reputational risk comes from. We do not want to be known as a firm whose proposition hangs on two or three celebrity investors, because the point may come when they leave. So, in our case, we are trying to build credible franchises around key areas of capability.
Hildrey: One challenge is from the noise as fund buyers are inundated with information from managers all doing the same thing. How do you cut through that?
Social media and digital is really interesting in this sense. On the face of it, this suggests a boutique can compete with larger players because it removes the need for a large advertising budget. However, there is a challenge for a boutique with a small team to service social media. But if the content is really strong, we can add value and cut through the noise.
Bolitho: The noise is very challenging, especially if you go into new markets. There are always going to be large domestic incumbents and existing international brands, all probably with compelling propositions. You need something different.
Sanders: In a content-heavy world, it is a challenge to get customers to give up 30 seconds to read your content. But you don’t need 1,000 people churning out content. You need people who are thinking about what people want and how to make them engage with it.
Mackay: It is really worth looking at what keeps fund selectors awake at night. What do they see as the biggest challenges for them?
The biggest issue for fund selectors at the moment is regulation, and they’re really crying out for people to help them understand what it means for them. I think fund managers can really help, but in areas that are quite separate to product or areas designed to help meet sales targets.
It’s not just an issue of what the regulations are; it’s what impact they’re going to have on the fund selector and their business. It’s a much more personal approach than saying that MiFID II is coming out and you’re going to have to charge fees. JP Morgan has done a very good job on this in the UK.
Sanders: Yet often, in the wholesale market, our direct clients and the people selecting the product are sometimes less interested in shifting distribution models. Their actual interest is about how a fund fits within a portfolio, and quite rightly because they’re looking at the due diligence around your investment expertise.
Cardew: One more point I’d say is that we churn out thousands of articles and give away our insights and our views to people who may hold large assets or nothing at all with us. I think fund managers have an opportunity to be far more disciplined about this.
Sanders: An experience we have with content and delivery is with YouTube, when we broadcasted 10 golden rules about investment. The idea was to make it engaging and then work out how we could draw people into further dialogue. We had two million people in the UK and US who watched the videos end to end, and they’re now engaged with what Aberdeen wants to talk about in equity investing.
The next challenge is to remarket to them and talk about more subjects.
Cardew: We launched a 60-second video format – which is pretty much the capacity people have got to engage with social media – and it was around about 50 times more successful than anything we’ve put out before.
We have broadcasted 40-minute economic forecasts, but we found people would watch the first 10 minutes and then tune out.
Digital is a format that requires very, very specific skills and you get very quickly found out if you don’t adapt to it well.
Hildrey: Content has to be segmented for different audiences. Different parts of the market need different things. If you’re a big fund buyer, you may well want a quarterly update and in-depth analysis. If you’re an end consumer, you want something very simple, maybe just an infographic.
Sanders: I partly agree. Often we’ve segmented clients by traditional channels, but found we needed to understand our clients as a series of individuals. Some will want content by post and some will want it on their smartphone in video format. But understanding more about our clients as individuals requires data.
Hildrey: When it comes to digital, I agree that it’s much more about the behaviour of the fund buyer.
Sanders: One of the many things that we’ve learnt from Google and Amazon is that they’re not really investing in desktop technology. Everything is going to mobile. Therefore, the content we produce gets reshaped completely. Downloading PDFs to smartphone is clunky and difficult, and the tablet is almost the same. So the format of content changes. There needs to be more video, more infographics.
Bolitho: We have launched an audio application called OMGI Radio. Basically, you can download podcasts on market viewpoints or fund updates. You can listen to updates about how a fund is managed and how to sell it. OMGI Radio came from feedback, particularly on the adviser side. They spend a lot of time travelling in cars and can download content to their smartphone and listen to it. We’ve seen a lot of interaction with that, just because it fits the way they operate. It’s been a big hit for us.
Funds Europe: It may be said that the funds industry is 10 years behind retailers when it comes to understanding customer data for marketing purposes? Is this true? Is it changing?
Sanders: We’re not quite 10 years behind, but we are behind. However, I do see this changing because we’re all learning how other people outside our industry do this and it starts with adopting those practices.
Cardew: Historically, the way data is managed in asset management forms a record of everything the client has done. But what we really need is insight into what the client is about to do. Big data analysis requires alignment of operations, which is hard to do with legacy systems, but if you can do it – it will give you the edge.
Sanders: All kinds of data models can be brought together, but the challenge is about how to query the data. What are you going to ask it? How do you turn a big question into a series of more direct questions that will give you relevant information? With Big Data, 80% of it is going to be useless but the 20% left is going to be great. That’s the bit to work out.
Hildrey: Because distribution is changing from sales-led to marketing-led, we are going to follow the consumer company route, where leads are generated through digital and marketing data.
I think the longer-term question that people ask is, with the younger generation using digital to make purchases, is asset management going to follow online? I’m not sure that anybody knows the answer.
And the second question here is about whether asset managers have the brand to be able to do that? If not, we might have to operate behind consumer brands on an outsourced basis.
Funds Europe: How will online selling and portfolio management change the industry?
Cardew: Schroders has taken a stake in Nutmeg, a low-cost online wealth manager that exclusively uses passive funds. In terms of our understanding of this space, it’s accelerated.
Online is a completely different method of acquiring assets and it’s made us, as a business, think very firmly about the next five years and how distribution might reorganise itself. It’s made us think a lot about what we need to do in order to be effective at understanding the end consumers of our products.
Sanders: Certain customers are going to have certain needs. For me personally, I don’t understand why, when the rest of your life is so slick and simple and manageable on your phone, in wealth management it starts to slow down and become more painful. It is obvious that this has got to change at some point. It doesn’t mean that everyone is going to switch to online wealth management, but you can see, for certain people, that online will be very, very appealing.
Hildrey: But this industry is also slightly different, because we’re talking about people’s money and the potential risk of market loss. People’s lives are getting more complicated and I think there will always be people that need advice. People won’t just all go online without any advice.
Mackay: If we want people to start saving when they’re 20 years old, even if it’s just small amounts every month, then these people want online access. They don’t want to fill out a form. That’s where the Nutmeg proposition works.
Sanders: Look at banks. We may say that there will always be people who want to go into branches, yet banks themselves are more and more online.
The adoption rate of technologies through generations is quick. I always cite the example of my parents. They would never have put credit card details online a few years ago to buy anything at all because they didn’t trust it. Yet now, all my kids’ presents from them come from Amazon!
Funds Europe: Where do you see the greatest changes and challenges for the industry in branding, marketing or distribution in the next few years?
Bolitho: The shift of emphasis to real outcomes over relative outcomes, particularly in the de-accumulation space, the at-retirement market.
Mackay: Most asset management groups don’t allow people access to Twitter or even LinkedIn, in some cases. I think that’s something that they’re going to have to address with the regulators.
Hildrey: Digital, social media, and the whole consumer profile. I think the industry will see asset managers start to try and create a real consumer presence online, and there will be a role for really good, active managers in this.
Sanders: Branding and the ‘retailisation’ and individualisation of our client base. People will go more for self-direction, whether they are professional fund selectors or others. RDR, or RDR-like regulations, are going to be a driver for us.
Cardew: One challenge centres on the nature of the assets that we run.
Wealth is concentrated among the older members of the population and so we are moving from a growth phase towards, in some ways, a nurturing and protection phase as people hit retirement. That’s an issue for intermediaries and institutions.
The power of influence is rotating back towards the end consumer and the end consumer will ultimately, in 10 to 15 years, be the overwhelming driver of their own destiny when it comes to solving these problems.
©2015 funds europe