The vast majority of asset managers are still in the early stages of maturity in their marketing efforts.

Research by consulting firm kasina, however, shows that mutual fund and ETF managers that fail to make use of digital tools to gain customer insight, and deliver the right message to the right prospect at the right time, risk ceding client loyalty and assets.

Bob Dorsey, co-founder and managing director of Ultimus Fund Solutions, which works with 30 mutual fund clients, has seen marketing efforts fail and succeed. He speaks with Money Management Executive about how innovative firms can use marketing as a way to showcase commitment to investment philosophy and strategy to differentiate themselves in a crowded marketplace.

Q: What are some of the traditional marketing strategies employed by mutual fund managers?

Historically marketing has been about branding, imaging, consistent messaging and advertising. Traditional marketing of mutual funds includes paid print advertising, public relations, interactive websites, plus marketing materials such as pitch books, fact sheets and portfolio manager commentary. Marketing strategies differ distinctly across the retail, intermediary and institutional channels.

Q: What are some more innovative strategies?

Marketing is no longer print advertising in which star ratings are used to entice investors. Marketing strategy has evolved to focus on educating investors and financial intermediaries and providing them with tools that allow them to assess how specific funds might fit into financial plans.

While traditional marketing is still in use, some investment managers have started to employ more innovative strategies. These strategies demonstrate leadership and employ more educational tools/vehicles. They also create more interaction and provide opportunities to demonstrate authority on the broader economic environment.

To that end mutual fund managers are now developing videos, blogging and using portfolio manager calls to educate investors. Videos can be used to tell the fund story and describe the investment strategy. Blogs can be used to demonstrate leadership and provide investment insights and education. There's also an increase in portfolio manager calls on a quarterly basis for financial intermediaries, to provide views of the market and positioning of the portfolio. The calls are either product specific or generic to the firm. Marketing for wholesalers is different. Rather than product specific information, they need information on practice management and research results from investment studies. Wholesalers need marketing tools and documents that support a consultative approach.

More innovative firms use marketing as a way to showcase commitment to their investment philosophy or strategy to differentiate themselves in a crowded market place. Marketing is about having a spend budget and no matter how good or bad your fund is doing, you continue to push your investment message out, but not necessarily your star rating.

Q: What are the top trends in the mutual fund space?

The two top trends in mutual funds are the convergence of liquid alts with typical mutual funds, plus the increased regulatory trend influencing how mutual funds are marketed. With the proliferation of alt funds and complex strategies, marketing must create materials that are informative and concise -- yet easily explain the benefits for the financial intermediary. Convergence is a trend that's resulting in a cluttered marketplace and increased competition. Therefore it is more important now than ever for marketing to be more effective, to create a clean message and articulate complex strategies. Competition is everywhere for typical mutual funds, alt funds and ETFs. The SEC and FINRA are more concerned about how these products are marketed and positioned to investors. They are forcing intermediaries to be more knowledgeable about these products and ensure these products are suitable for their clients. Recently, regulatory oversight groups have been focusing on the importance of educating investors.

Q: How are marketing tactics between established and startup/small mutual funds different?

New funds or small, startup funds don't have a significant marketing budget or track records to rely on to effectively compete in the marketplace. This results in them having to be nimble, focusing on branding through PR and their website, and also by making their manager available. To stay in front of investors, they need to tell a concise story about why they created their fund, what makes their fund unique.

Q: What is the future outlook for the fund industry?

As a result of the Dodd-Frank Act, most hedge fund managers had to register with the SEC. Now that they are registered, we are seeing the convergence of strategies between liquid alts and traditional mutual funds. This regulatory oversight and convergence trend now makes marketing extremely important. The funds that understand and implement key marketing strategies effectively will be the ones that survive and be relevant in the future.

Q: What are the biggest barriers that fund managers face and how can they overcome them?

There are three big barriers that fund managers face: increased competition, cost of regulation and aversion to change.

Competition for investment dollars has increased due to the number of new options for investors. Fund managers can help overcome competition through marketing differentiation with clean and clear messaging. The cost of increased regulation and compliance is mostly borne by shareholders, yet financial intermediaries and shareholders want lower cost investing options. The difficulty for the fund is keeping it affordable. The aversion to change can be overcome by changing the fund group's mindset on how they market their funds. The best way to overcome this hurdle is to understand that they need to demonstrate value to investors through education and also to demonstrate knowledge of how economic conditions impact an investor's investment strategy.

Bob Dorsey is co-founder and managing director of Ultimus Fund Solutions. 

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