MME: The financial sector has always had a guarded approach to speaking with the press, but you say firms have been unusually shy of the media as of late. How do you explain this trend?
Sondhelm: When it comes to mutual fund managers, yes they are guarded, but they don't have as many strict requirements for speaking with the press as upper management does.
Back in the late 1990s, when performance was going up, mutual fund managers were thrilled to talk to anybody because the odds were the story would be pretty flattering and generate sales. But now with Eliot Spitzer's investigations and flat performance, there's a lot of issues that would make fund managers resist the media.
Aside from the current climate, past bad experiences can lead many fund companies to avoid or resist dealing with the news media. Maybe they were misquoted or were frustrated because they spent significant time with a reporter without being quoted. Another big issue for fund companies is when a reporter calls for a specific story line. What many managers really want to talk about is their fund, their fund company and their investment philosophy.
It's very frustrating, so a lot of fund managers resist the process because they don't understand how to change being on the receiving end of inquiries. When that's the case, when a reporter comes to them for a certain story line, the reporter's in charge and it doesn't make it a whole lot of fun for the fund manager. It can even be scary for some, as well.
MME: Why is effective media coverage essential to a successful marketing strategy?
Sondhelm: The obvious reason is visibility. It helps attract and retain investors. You see it all the time when a reporter calls a fund manager, writes a flattering story and the fund's phones ring off the hook.
It also helps retain investors when your fund is not doing well and a client is thinking of taking money out of the fund. If you're talking about the fund and that you may be underperforming but are sticking to your strategy, you show you are in control of your portfolio, thinking long term and conveying all the basic messages. At least investors will think you are steering the ship.
Everybody in the sales and marketing departments of fund companies and in the organization overall are hungry for these articles. They energize the sales team. I was talking to a big fund company last week and they told me the No. 1 request from wholesalers is new positive news articles. The most recent news article they have is from 2002, but they're still using that article for their wholesalers. That's all they have.
And it's not just the wholesaling channel, it's also the 401(k) and institutional channels. Third-party endorsements really add credibility to their sales and marketing efforts. One of our clients just got a feature article in Barron's and they ordered 10,000 reprints to use.
The publicity on the mutual funds is used across distribution channels, including private accounts. It's often the same money manager who manages both the fund and the private account, so it's the same strategy, same people and you can cross over and leverage those articles for your institutional business. Many times we hear that the fund doing the publicity is really helping to speed up the sales process and add credibility to the institutional business. If you ask an institutional salesman why they won an account, it's typically because of performance or the relationship, but if they lose, it's typically because of the brand. "Nobody's heard of us," they'll say. So, leveraging your mutual fund for publicity is an excellent way to attract institutional money.
MME: You run a media boot camp to teach firms to better interact with the press. What is the main message you try to convey?
Sondhelm: You are not running a successful media program if you're resisting the media. Currently, the whole goal of the program is to help managers and firms to feel comfortable and stop turning down interview requests. We help them sound smart and look good so they can talk about their product.
There are a couple of keys to this, the first being the message. A lot of companies have been using a message, a story, an investment philosophy for decades and it never changes. Sometimes they need an outside perspective to come up with messages that sell. And it's not just about having the messages in written form. It's how you communicate those messages. Typically, fund companies have many spokespeople, and many times they're telling different stories. So first, we want to put everybody on the same page.
Then we want to help people to cut their answers to an appropriate amount of time while still providing a lot of meat in their answers. We work with the fund managers to help them realize that it's about give and take. The reporter has needs, and managers have needs. Yes, you have to answer the question, but you can steer the conversation in a way that benefits you.
For example, I see fund managers on TV all the time asked about their views on stocks such as McDonald's. Their answer is often something like: "I like their hamburgers, but not their stock, so we don't own it." The answer is very catchy, but it does little to promote their fund. Managers should be talking about stocks from their investment perspective, and if they don't hold the stock, they should address the stock but also talk about a stock that they like that may be similar.
To help managers prepare, we practice in front of a camera, under the lights, in a TV studio. We want managers to be ready for anything, because what we don't want is a fund manager going on TV or talking to a reporter and doing the interview and then feeling unhappy that the reporter asked all the wrong questions and he didn't get any of his messages out.
MME: A few months after the scandal initially broke, some firms like Putnam Investments tried to get the message out that they had cleaned up their shop by granting interviews to various media outlets. As you pointed out, there seems to have been a shift away from this approach by the overall industry. What do you think has been the net effect, or the damage done, to the industry and to firms individually involved in the scandal?
Sondhelm: There's no substitute for regular communication. Not everybody would say it's a good thing to shy away from the media when the story is negative, because the media's an open forum to tell your side of the story. There was a period when the scandal first broke when most firms wouldn't talk to reporters. However, once they figured out their game plans, then they started talking and advertising. They tried to be strategic about it, but in the meantime, they lost a lot of assets. It is very important to show that you are in charge of your portfolio and you are not hiding.
MME: How do you minimize risk and still get positive coverage when the story is not flattering?
Sondhelm: Be prepared for the interview. That means know the reporter and what they're looking for. Nothing's perfect, but do the best you can in pulling up articles they've written in the past so you know them and their history. But also know your message. Sometimes fund managers just wing it and wonder why the story isn't so good. Also, media skills and interviewing skills are critical. If you just answer questions, that's risky. If you go in with your messages and understand techniques on how to give your answer even when reporters are asking other questions, that makes it a whole lot easier for you and minimizes the risks.
Also, it is important to understand that there is more to the process than just answering the questions. Firms can actually go back to the reporter and try and provide more information after an interview is over. Firms can offer to find third-party sources that can back up their side of the story.
MME: What does a fund company need for an effective communications team?
Sondhelm: The most important thing is commitment from the top, meaning the CEO and the president. Once you develop a media presence, you have a new client base. You have your clients, your distribution and then you have reporters. You have to treat them as clients, too, or they are going to stop coming to you.
You need to have spokespeople who understand the process and are willing to give it the time it deserves. Then you need people internally, usually your PR or marketing people, who have the relationships with reporters who can tie in your products or your expertise to current events and who are really connected and know what is being written about.
MME: What is the best way to measure whether or not a firm has a successful strategy in place?
Sondhelm: The typical form of measurement in PR is what they call ad equivalency, which calculates how much an ad the size of an article written would have cost. It can be in the tens of thousands or even hundreds of thousands of dollars. However, I don't think that's a very realistic way of measurement though because it doesn't factor in the impact on the bottom line.
The way to measure clearly is in increased hits on a firm's Web site, increased call volume, if their wholesalers are using these news articles in their efforts on a daily basis and what the wholesalers are saying. Are they saying they need more of these articles or that the stories helped speed up the sales process? Firms need to ask, "Are we getting more institutional business because of our increased brand on the mutual funds?"
Firms can also measure by simply asking: "Are we growing, are we getting more sales than before we implemented this program?" Another question should be: "Are financial advisers finding us? Are they coming to us with requests as opposed to us knocking on doors?" It really helps because that is lead generation.