Fund managers can make more money by marketing. The trick is to know what marketing is exactly...

I have a passion for following fund managers’ performance and comparing how they stack up against their investment philosophies. There are a handful of fund managers who stick by their principles and deliver above average results through the ups and downs of the markets. What surprises many managers is that investment doesn’t always come flooding their way when they are doing better than the index. There are plenty of examples where poor performing funds continue to dominate in the competition for FUM.

It’s not enough to rely on BDMs and the distribution and sales channels; every fund is out there building relationships with the instos and advisers. The commercial reality is rooted in human nature; ultimately the salesmen who managers are relying on to recommend a fund will go for the easy sell. And as we’ve seen, performance can’t be the only draw card or there wouldn’t be 19,500 funds on the market where the biggest generally aren’t the best. It would be a mistake to think the end of commissions will result in a rush to quality, inertia and confusion will see to that.

It’s time the better managers tried something new to most in the industry. It’s what’s been honed and crafted by the world’s most successful companies, from Apple to Armani, Mercedes to Mars: it’s marketing. In a world of multiple choices, marketing is one of the few tools that can make a significant contribution to the success of a business.

The financial services industry still confuses sales and distribution for marketing

It isn’t. Marketing takes the ball the first fifty metres and sales kick the goal. Then it’s marketing that continues to remind investors why they made the right decision choosing your fund, so they’ll stick by you through the inevitable bumps and falls. And invest with you again and again.

In the words of Wikipedia, marketing is the process by which companies determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It is an integrated process through which companies create value for customers and build strong customer relationships in order to capture value from customers in return.

Manage the image you create for your brand and how you promote it

From product design and the language you use, your logo and stationery, the look and imagery in brochures and PDSs, the content and design of e-newsletters, what is on your website and how it is presented, to advertising and sales collateral. When every part is working together in a co-ordinated fashion the whole adds far more value to the business than the investment in the parts. And just like investments, managed well marketing delivers compound returns.

Over the years I’ve found integrated marketing works just as well for financial institutions as it does for baked beans. Research by the School of Management and Finance, University of Nottingham showed back in 1998 the similarities emerging even then between consumers’ responses to financial services ads which featured the same cues as ads for fast-moving consumer goods (FMCG) and the influence on subsequent purchase decisions.

Put simply, when it comes to proven ways to make money, fund managers can get a healthy ROI from marketing. For evidence, they just have to ask about the results of my many marketing experiences of 30 years, from banks to baked beans.