Arnold Wechsler, CEO of Wechsler Ross & Partners of New York, founded the marketing and design firm in 1985. Wechsler Ross has built a long list of mutual fund and financial services clients for whom it has developed marketing materials and campaigns for investment products and services.
Wechsler discussed the future of mutual fund marketing recently with Mike Garrity, a Mutual Fund Market News reporter. An edited account follows.
MFMN: Is there anything you think won't work as far as mutual fund marketing now and in the future?
Wechsler: What won't work are the same old tired ideas. I think the investing public has become a great deal more sophisticated. They know about the basics. What they really want to know about now is what they are investing in.
They want to know stocks a manager is investing in. They want to know who the manager is. They want to know why the manager buys and sells. They want more than they cared to know a few years ago. And I think that trend is going to continue.
MFMN: Do you think marketing in the coming years will look a little more like either education or advice?
Wechsler: Yes. People know they have to save, they have to invest. They want to know how, what's going to give the proper balance between risk and reward.
MFMN: Will the Internet change the way companies market themselves? Will you use a different type of marketing?
Wechsler: I don't want to restate the obvious but the Internet is changing everything. Mutual funds are information products. They are products that really don't have a tangible corpus. They are information. Information in the past has been dependent on paper. With the Internet, the information exists electronically, which is absolutely extraordinary for an information product. The Internet's strength is bringing information quickly and inexpensively. And also in many ways it started off as a very democratic medium. A mutual fund company with $2 billion in assets can develop a pretty good, high functional site in terms of quality of information.
MFMN: Will the Internet prove less expensive than other mediums, eroding their business over time? Will marketing become more Internet oriented?
Wechsler: Yes, but one of the hidden expenses of the Internet is advertising. Some of the successful Internet companies are heavy TV and print advertisers, especially TV.
Wechsler: To draw people to the site. The Internet itself is so vast. That's a hidden expense. But once you have a digital identity, once you've built your brand in the hearts and minds of consumers, the Internet is extraordinary. Once you've done it, and they have a positive experience at your site, it's powerful. And as I say, it's democratic. You don't have to be Fidelity to have a great Internet site.
MFMN: If the trend is toward providing more information, does marketing become more product specific or do you still have brand advertising?
Wechsler: I think you'll have more brand advertising. I think the bigger fund complexes will continue to pour some money into brand advertising. Some have seen some positive results. I think they feel compelled to do it. You also have to notice that there are some very, very prominent players in the business that just are not TV advertisers.
Wechsler: Vanguard will never do it. But even in the load business. Putnam doesn't advertise to the consumer on national TV. Nor does American Funds. I don't think advertising is the panacea. It certainly creates awareness. You can be attracted to something but it's an information product. You want to know how it works, how it performed. The fastest way to kill a bad product is with great advertising. You can extend that to marketing communications as well. We're fortunate. We've had a great market and consumers have basically had a very good experience with their investments. The shareholders of Vanguard, they've had a positive experience. It has nothing to do with advertising. They run a little print ad once a week or something.
MFMN: When market performance drops, the need for marketing will be just as important. Will the message be different?
Wechsler: Hopefully we won't have to worry about that. The mutual fund industry has seen a fantastic, phenomenal growth of its equity products. They are what the 90s has been about, certainly the last two-thirds of the 90s. Five years before that it was all fixed income. I think the one thing that has happened with the fund industry over the last 20 years is that there are products for all seasons. And one day it's going to rain. I think companies are just going to have to get the message out; do a little re-education.
MFMN: Do you think the idea of marketing as education, driven in part by the SEC push for simplification of documents, is going to grow?
Wechsler: Absolutely. I think that there are two things that are very important to people - their money and their health. They want to understand it. It makes good sense for mutual fund companies to communicate in a clear, simple, understandable, comprehensive way. I think that trend is going to continue. People want to know. They want to understand.
MFMN: The industry seems slow to adopt the profile prospectus. Some of that looks like it could be driven by legal concerns.
Wechsler: I think there is more to simplified communications than some of the wherefores and whereases. It has to do with structuring the information in a sensible and simple way. Present the information in a sensible and simple way. It has to do with plain English writing.
A lawyer's job is to protect their clients from liability. I think that still can be done within the context of simplified communications. It's not just about prospectuses. It's about statements, it's about annual reports, every way that a company touches its customers.
MFMN: Simplification won't be just in the fund industry?
Wechsler: Absolutely not. Insurance policies, health care, it's a major trend in communications. You'll see it first in financial services. It's not about dumbing down. Its about removing jargon. It's about consistency of message. The idea is not to make it simplistic. The idea is to make it understandable.
MFMN: What do you think the industry will look like five to 10 years out?
Wechsler: I think there probably is going to be some new investment products along the lines of mutual funds or maybe some return to old investment products dusted off. We might be entering an era where we need some product innovation. The basic vehicle is certainly not tired, but it's maturing. I think you might see some different legal structures. I see a modest increase in advertising revenue spent. But margins are going to get thinner in the business. Advertising is expensive. TV advertising is very, very expensive. I think going forward, a lot of it is about technology. Technology created the mutual fund business to begin with. That's what made it grow.
MFMN: Your own shop has grown to about 50 people. Will it always be a partnership? What does the future hold?
Wechsler: I don't make predictions about my own business. I'd like to think that it will continue to grow healthily; that we'll add more services; that we'll do a good job for our clients. And we'll see where that takes us.