Six Suggestions for Getting Your Mutual Fund “Discovered” in 2010

On November 19, 2009, In Financial social media marketing, By Bruce Johnston
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By: D. Bruce Johnston, President & CEO, DBJ Associates

 

Numerous articles have been written lately on the massive rebound of stocks beginning on March 9, 2009.  Most mutual funds have enjoyed a nice performance rebound as well.  If your mutual fund is one of those enjoying this rebound in performance “How do you get “Discovered” in 2010?”

For that answer I turned to Dan Sondhelm, SunStar Strategic.  Dan specializes in preparing and getting asset managers in front of the appropriate media outlets to tell their story and go from “undiscovered” to discovery. 

Dan was quick to point out that most mutual funds with significant assets grew as a result of proactive selling activities – an individual fund is rarely “discovered” on its own. With more than 10,000 funds available to investors and their advisors, competition for share of wallet is fierce with 80-90% of fund flows going to the top 20 firms.

Dan’s 6 Comprehensive Suggestions to Getting “Discovered” in 2010:

  1. Have a written strategy.  Dan’s first suggestion is you start by developing a written strategy. Most mutual fund companies fail to get discovered because they haven’t reduced to writing their strategy to capitalize on their good fortune. 
  2. Have management buy-in.  Ensure you have buy-in from management and a commitment to the resources it will take to implement your strategy. Lack of buy-in, ample resources and accountability will make or break your program.  Predetermine an “owner” for every initiative, how the initiative will be tracked and how will success be measured.
  3. Continue your commitment to excellent performance.  Review your pricing model.  Ideally your product should be priced below 1%.  Also, evaluate the channels you are selling your products in to make sure you are maximizing your efforts and capital commitment.  No need to try to be all things to all people.  Focus, Focus, Focus.
  4. Make sure your products are on the major platforms.  Being on the Schwab, TD Ameritrade, Fidelity and Pershing platforms are important but not enough.  Establish relationships with the “gatekeepers” (e.g. research, key accounts, marketing, event planning, etc.) and make sure that you understand how each of these groups functions and although they separate in title, how are they interrelated. These platforms, at a cost to you, provide marketing opportunities throughout the year.  A strong relationship with your account manager will assure that you are alerted to the opportunities for proprietary mailings, sponsorship opportunities at local and national events in advance allowing you to make the most out of the opportunity. Leverage daily and weekly sales data provided by the platforms to communicate market, investment, performance and business building approaches to those RIAs that are supporting your sales effort.
  5. What’s your story?  Value shop, growth shop, GARP, disciplined or highly disciplined are not sellable stories.  Bring it to life. What makes your strategy different than your competition? How do you select stocks? What are interesting themes in your portfolios? What good decisions did you make?  
  6. Telling your story.  Provide timely information on your Web site. Regularly post themes about your fund and the good decisions you made. If your site doesn’t allow you to add timely information, upgrade it. Advisors won’t come back if there is nothing new. Engage the media. Let the financial press sell you. Then leverage the third-party endorsed reprints in your other sales and marketing efforts, in print and on your Web site. Be accessible. Advisors want to be able to communicate with the portfolio manager directly. Quickly respond to RIA calls. Showcase portfolio managers in quarterly Webinars, than post the event to your Web site. Drive RIAs to your Web site with a monthly Email marketing program to tell your story. Strategy and performance are just two key areas for content. Others include news media reprints, promotion of upcoming Webinars, attendance at an advisor conference, etc.

Thanks Dan for your time and insights.  As me, Dan would appreciate any comments you might have regarding his suggestions and would welcome any additions.

To read the full context of Dan’s blog “New Year’s Resolution: Get “Discovered” in 2010” please visit: http://www.fundfactor.net.

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FocusShares’ Erik Liik tells why social media marketing is an ETF start-up’s best friend

On November 18, 2009, In Uncategorized, By Bruce Johnston
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By: D. Bruce Johnston, President, DBJ Associates

Exchange Traded Funds (ETFs) have grown so quickly for so long, it is easy to forget that Erik Liik, the charismatic CEO and President of FocusShares was there at the beginning. Erik played a key role in the launch of the very first ETFs, the legendary Word Equity Benchmark Shares (WEBS), which provided access to international country-specific indexes in 1996.

Four years later, Erik co-authored with Financial Research Corporation, the landmark study “The Future of Exchange Traded Funds,” a prescient analysis of the challenges and opportunities confronted by ETFs. That document uncannily projected almost to the penny the asset growth that ETFs would experience from 2000 to the present. Erik’s passion for the ETF concept took a giant leap in 2008 when he and a small group of investment colleagues began building the groundwork for another, unique foray into ETF world. This time around Erik and company are setting out to build a first-of-a-kind, patented, principal-protected ETF target date series called FocusShares.

While pausing recently in his search for institutional funding, Erik met with me to discuss his views about the role social media marketing will play in launching his ETF program once funding is secured. He also shared his observations on Cerulli Associates’ just-released study.

DBJ                 When will you launch FocusShares?

Erik                As soon as we have completed financing and or strategic partnership, we are set to go. We have the marketing and sales teams in place and ready to move once the whistle blows.

DBJ                 Will anything be different your FocusShares’ launch as opposed to WEBS 13 years ago?

Erik                A few things will stay the same, but much will be different. We’ll have a simple, standard sales kit and broker selling guide. Beyond that, we intend to take maximum advantage of the many freeware or near-freeware tools available on the Internet to get the message out.

DBJ                 For instance?

Erik                We’ll use a very interactive press release approach to drive readers to our web site and blog which will be the centerpiece of our thought leadership marketing strategy. We intend to engage and build conversations with as many in our peer network as possible: individual investors, institutional investors, DCIO platforms, RIAs, wirehouses, the press and all who are looking for a better alternative to conventional target date portfolios.

DBJ                 How important a role will social media marketing play?

Erik                Tremendously important. In this economy, we cannot afford to overlook anything cost-efficient that can help us build a conversation about FocusShares. One area we will look at immediately is beefing up our presence on LinkedIn. Each of my partners has a contact page. Once we launch, we will have a contact page for FocusShares itself, too.

DBJ                 Are there any competitive ETFs doing something similar on LinkedIn?

Erik                Yes, AdvisorShares has a fairly high visibility on LinkedIn. They’ve done a good job of putting weekly podcasts and other information out there, although they seem to have lost a bit of interest in it. The last post up was in June.

DBJ                 That’s one of the problems with a social media strategy. You have to keep it current.

Erik                We know that going in. I told the team, we are all responsible in developing a one-to-one approach to establishing our thought leadership in this area and expanding our presence through social media efforts. It will be a lot of hard work and success won’t come overnight, but I believe we’ll have done the spade work to create lasting, long-term relationships with our clients.

DBJ                 On another topic. The new Cerulli Associates’ study came out called “Exchange Traded Funds: Threat or Threatened?” What do you think of it?

Erik                I think the title is a little cryptic.

DBJ                 It is a little cryptic. Cerulli, basing his survey on just 400 advisors, stated that 45% prefer using actively managed mutual funds in their clients’ portfolios rather than ETF products.

Erik                Well, that flies in the face of what most consider a mass exodus out of mutual funds to ETFs. It really contradicts a recent Schwab study that said 83% of RIAs prefer using ETFs in their asset allocation strategies. It would probably be helpful to have a better understanding of the advisor demographic Cerulli was referring to. Today’s ETFs provide passive exposure to markets, sectors and industry group. They are excellent tools for executing many investment strategies.

DBJ                 Will the use of ETF wrap products increase?

Erik                Yes. But wraps will not be the only way advisors and investors increase their ETF participation. Almost any investment objective can be offered in the ETF structure. To date the majority of ETFs are passive.

DBJ                 It appears that actively managed objectives and solution based objectives are the next step in the evolution of the ETF. Do you agree?

Erik                Absolutely. IndexIQ has launched a series of ETFs that actively seek to replicate various hedge fund strategies.

DBJ                 How is FocusShares positioning to meet the opportunities and challenges of tomorrow’s ETF market?

Erik                In 2008, we identified flaws in traditional target date mutual funds, which were exposed in the recent historic market collapse. Traditional target date mutual funds do not provide investors with protection of capital as an integral part of a retirement planning and nor do they provide transparency of fund investments. FocusShares, on the other hand, developed an investment methodology that would provide progressive capital protection within the ETF product structure.

DBJ                 Erik, these are exciting times for you. I wish you much luck with your new venture.

Erik                Thanks much Bruce.

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How 12 million people brand your company 27.3 million times every day

On November 17, 2009, In Financial social media marketing, By Bruce Johnston
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By: D. Bruce Johnston, President, DBJ Associates

 

That’s 12 million people engaged in 27.3 million conversations on Twitter every day.  They are branding your company even if they are not mentioning you. That kind of branding is called “ignoring the non-entity.” In financial social media marketing and every other industry it’s the branding of the invisible.

This increased and increasing volume of “conversation” is indicative of the heightened adoption of social media in general and reflects a significant shift in how marketers approach customers.  The shift from talking “at” customers to having a conversation “with” them has begun in earnest. 

Watch Mad Men on AMC and see the difference between an ad monologue to many and a one-on-one conversation. Brands no longer say to their customers what they are. Rather, it is the customers themselves who are saying to the brand, “Here’s what you are to me.”

“You can’t just say what the brand is. You have to get the people to say it to each other,” says James Farley, CMO Ford. By giving away 100 Ford Fiestas to influential bloggers, 37% of Generation Y was aware of the Ford Fiesta before its launch in the United States. Is it any wonder why 25% of Ford’s marketing spend has been shifted to digital/social media initiatives? And, for those keeping score, Ford is the only U.S. auto company that didn’t take a government loan.

Social media applications, like Twitter, are where the customers, prospects, cynics and champions of your brand reside. Like it or not they are talking about your brand, forming opinions about your brand and sharing that opinion with anyone that will listen –  27.3 million times a day.

Given this new communications paradigm what should financial services product originators and distributors do?

Let’s talk about what they shouldn’t do first – they can’t cut their way to growth.  They’ve been there, done that and it doesn’t work.  It does however assure that firms doing this will lose precious ground to savvy competitors who are engaging their customers on a regular basis. 

Throwing money at wholesalers, internals and marketing types is expensive and not likely to be tolerated during this time of margin and scale compression.  Although the last half of 2009 will help margins they are still projected to be down from just below 30% in 2008 to just over 25.5% in 2009.  If investor comfort with fixed income persists firms have but one choice to achieve scale, bring in more assets. 

There I’ve already given you the answer: Engage customers through social media to improve sales, scale and margin.  To engage customers get this right: “Social media is not about being promotional or selling, it’s about engagement”.

A Wetpaint/Altimeter Study: “The World’s Most Valuable Brands, Who’s Most Engaged” ranked the top 100 global brands.  The study found those companies that are both deeply and widely engaged in social media significantly surpass their peers in both revenue and profit.  The study places brands into one of four engagement profiles.  Mavens are those firms with the highest level of social media activity and Wallflowers are those firms with the lowest level of social media activity. 

The study reports that Mavens experienced Gross Revenue growth of 18%, Gross Margin growth of 15% and Net Margin Growth of 4%.  Wallflowers saw their sales decline -6%, Gross Margin growth decline by -9% and Net Margin growth decline by -11%.  Maven results would certainly improve the three statistical areas that most financial services executives monitor on a daily basis.  Yet as compelling as these results are a recently released Forrester Research report finds financial services companies will spend only $200,000 on social media in 2009, the least amount of any industry. 

The trick for financial services companies is to create meaningful marketing content that rises above self-promotion and allows you to connect directly with your customers?  Start by listening.  Since listening is the basis of trust in all relationships it allows companies to determine what information will be the most relevant and valuable to their customers.  Use this information as the cornerstone of building a trusted relationship with your customer.  If you are concerned about where your customers might go when the equities markets return spend the bulk of your time here developing their trust.

Your customers can now get information anywhere and your urge is to sell products.  The new marketing isn’t about self-promotion; it’s about giv­ing customers what they need to become educated consumers.  We have entered the age of content and education marketing. If you want customers to see your brand as the trusted information source, you must begin to think like an information provider, not just the provider of goods or servic­es. By empowering customers with genuine news and informa­tion, a company becomes one-half of a trusted relationship.

If your customers view your firm as representing an idea or theme they care about, they will engage you on a one-to-one basis engaging in two-way dialogue.  However, if customers view you as just promoting products and services, they have to be willing to be the recipients of a one-to-many, one-way monologue. At this point more and more individuals choose to opt out of the one-way monologue.

Social media has changed the rules. Once an individual finds a better service or product through a peer network that affirms or changes their opinion, they can’t go home again. They can’t go back to the one-way monologue from a company for their sole decision-making input — no matter how good its products and services may be.

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What FINRA doesn’t want you to know about social media

On November 5, 2009, In Uncategorized, By Bruce Johnston
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By: Bruce Johnston, President, DBJ Associates 

Topic A at the recent Securities Industry and Financial Markets Association Annual Meeting (SIFMA) was what to do about the fastest-growing communications phenomenon since the invention of the Internet: the explosion in social networking.

Whenever compliance and communications come together there is sure to be a tussle and this meeting was no different. Chairman and CEO Rick Ketchum cited the current policy as “currently constructed, these sites would not permit you to easily supervise these communications. For that reason, most firms prohibit their employees from using these sites for their business.”

Still, trying to hold back the social media communications tsunami is not likely to last. The cost of not communicating to advisors and clients through their preferred vehicles does not make a lot of long-term business sense.

Mr. Ketchum readily admits that holding back the tide is not an answer either, “Nevertheless, interest in these sites will not go unabated.”

Unfortunately, the way forward so far from the FINRA perspective seems blustery at best, characterized by ill-informed awareness of archiving technology, fact-free assumptions about user demographics, a confounding secretiveness not appropriate to an industry hammered for lack of transparency, and a rather limp offering of notice instead of real rules.

  • The archiving technology is already here to be fully compliant. According to Mr. Ketchum, “We continue to witness the advent of technologies that will challenge your (distributors’) ability to ensure compliance with regulatory requirements. For example, as currently designed they may not allow you to archive and maintain the communications on your own books and records.” Pat Allen of AdvisorTweets, points out that the independent advisors she tracks for her blog are archiving and maintaining their records scrupulously. I uncovered several solutions; including Lifestream Backup, now being branded as ”Bakupify”, available for $4.95 per month. Instant messenger FaceTime released a secure portal for enterprises seeking to monitor employee content posted to blogs, wikis, webmail and social networking sites such as Twitter, Facebook and YouTube.
  • Social media is not just for kids anymore In a line that is darn near close to a call to “grow up,” Mr. Ketchum said, “Many registered representatives, particularly younger ones, want to use social networking sites to communicate with friends and potential customers.” By conflating friends and customers, Mr. Ketchum draws an inference that somehow social media and irresponsible behavior go hand in hand. Also, it completely overlooks the more seasoned professionals who make use of the new technology tools.
  • Why does FINRA put social media policy behind locked doors? An even more baffling turn came out of the meeting with the announcement of a secret committee to review policy and propose change. “We have formed a Social Networking Task Force comprised of industry participants to explore how regulation can embrace technological advancements in ways that improve the flow of information between firms and their customers—without compromising investor protection,” Mr. Ketchum said. In particular, the group is consulting with FINRA officials on real-life queries, such as how frequently firms have to monitor third-party postings on their own blogs, and how much liability they bear for manipulative or fraudulent postings from the public. Other topics, such as how to capture social networking communications, also are being discussed. When asked who was on the committee, Thomas Pappas, vice president of advertising declined to name the firms involved in the taskforce, but said they include brokerages with independent sales forces that want to use networking sites to advertise their services.
  • All this for just a notice? At the conclusion of the meeting, Mr. Pappas said he did not expect the self-regulatory organization to release rules on the issue. “I think we can probably get where we need with a notice,” he said. A notice without real regulations behind it is sure to punt the social media question further down the road and embroil compliance officers and marketers in endless hours of discussion and compromise.

It is well documented: time spent on mutual fund websites is diminishing.  This might be a clue that shareholders are tired of being communicated “to” by a no longer preferred communication tool. Why not listen to the shareholder and ask them about their communications preferences? Handled properly the correct solution would allow for the needed transparency that FINRA advocates in word, but oddly enough, undermines in deed with this lackluster, secretive and uninformed approach to one of money management’s most important issues.

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Recent surveys offer a mixed picture between what advisors are selling, what money managers are promoting and what consumers are buying

On November 3, 2009, In Uncategorized, By Bruce Johnston
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By D. Bruce Johnston, President, DBJ Associates

According to Schwab Institutional’s recently released Independent Advisor Outlook Study, 90% of independent advisors added new clients in the third quarter and intend to take more risk with their client’s assets. These advisors are seeing more opportunities in equities, and are signaling moves away from cash and fixed income. Nearly one-third say they plan to invest more in US small cap and large cap equities over the next six months. Only 25% plan to invest more in fixed income, down from January’s high of 42%, and just 8% plan to hold more cash in client portfolios.

The better mood over domestic equities is also accompanied by other positive themes:

  • Market Outlook: Advisors’ six-month outlook for S&P 500 is most optimistic in two years.
  • Economic Outlook: four in 10 RIAs expect current recession to end in less than 12 months.
  • Client Outlook: Almost half of new assets coming to RIAs left full-service firms.
  • Investment Outlook: Intent to invest more in U.S. small-cap equities at all-time high for RIAs.
  • ETFs remain the favorite investing vehicle for independent advisors with 83% currently using exchange traded funds and 39% planning to use more ETFs.

If I’m a mutual fund company creating product for delivery through the independent advisor market the Schwab study makes it pretty clear as to the products I should be developing to meet market demand. That is until I reviewed the results of a July 14, 2009 Ignites poll titled: “Do you believe your firm is positioned in terms of product choices and service quality, for a post-crisis investment landscape?”

The Ignites poll, although a much smaller sampling of 241 participants and conducted just two weeks prior to the Schwab Study, provides a very different view.  Three-quarters of the respondents believe their firms are well positioned to deliver the product and services that will meet the post-crisis demands and needs of investors.

And what are those products and services? Investment firms are developing retirement income funds that seek to provide steady income and stability through guarantees in addition to funds that are less correlated to the equity and fixed income markets.

Could there be a bigger disconnect between the investment firms, independent advisor and their customers?

Now to confuse matters more KPMG published a study in the same time frame as the others.  According to the KPMG study of global investment executives, 65% of the respondents said their firms’ top management lacked vision and posed a major obstacle to change during a financial recovery. The study also revealed that 90% of the respondents had no confidence in their firms’ upper management.

Confused yet? What’s wrong with this picture? Actually nothing because it fits right into how it should work if you are still employing yesterday’s marketing concepts and approaches.

You know what I’m talking about – firms relying heavily on the sizzle of the message and the brand imagery; firms claiming that they know what’s right for the customer because obviously they don’t know what they want; and firms developing products and messaging in-house without consulting with their customers.

Note the contrast in how successful firms of the future will approach marketing versus those of yesterday.

  • They will listen and respond to their customer’s needs, not their own needs. 
  • They will admit they don’t know what is exactly right for their customer’s but will engage their customer’s constantly in order to make adjustments to products to meet those needs. 
  • They will admit that product is important, which is why the need for constant communication through the organization in order to be successful.

Social media will allow firms to create and leverage functional customer intelligence which will be the difference between giving customers what they presume they want and what they actually need.  Firms that get this right will be viewed as Thought leaders allowing them to Expand their Market Presence and through Measured Results; they will know when they have achieved success.

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