Some asset managers get into the mutual fund business to provide a pooled investment vehicle for smaller accounts or because a few existing clients asked for it. But many mutual fund firms want to grow beyond their existing client base. They want to generate demand through third parties such as Schwab, LPL or Merrill Lynch. Although obtaining selling agreements with these firms can be expensive and time-consuming, eventually most firms gain access.
Access, however, doesn't automatically mean sales. Competition with the largest name brands is fierce. They have ample resources, including experienced executives with distribution and sales track records, teams of wholesalers supporting advisors, and spend millions on advertising. These firms also leverage data to find out who their customers are and to target and serve them efficiently.
According to Morningstar, the 50 largest mutual fund firms own 85% of the assets and receive more than 70% of the flows. Despite these impressive numbers, many financial advisors like working with boutique fund managers that have niche strategies, a brand based on their founder's name and portfolio managers who are accessible by telephone.
Do you have a good story to tell, but find that investors aren't paying as much attention as you'd like? Or perhaps you've been building your distribution and are looking for ways to improve your strategy?
The end of the year is the perfect time to think about what you accomplished and what you want to accomplish in the next twelve months. This checklist will help ensure you've thought through the major considerations to plan your distribution strategy for 2015.
Goals and objectives: Setting a specific goal of increasing assets under management is a good start. Your sales goal should be the difference between your assets under management goal and expected market fluctuation.
Target market and accessibility: Understanding who your existing clients are and why they chose to give business to your firm will help you to find new prospects that are likely to sign on with your firm. Data tools such as sales aggregators and RIA databases can help you develop an understanding of your advisors and those in the marketplace faster than you would without automation.
Pricing and share class: Most fund flows are coming into no-load, load-waived, and I shares. Be sure your share classes match what your ideal clients would buy. Also, align your fees with your competition. Focus on the expense ratio of competing funds that are selling.
Story: Survey your existing clients or advisors who don't know your firm yet. Their responses will help you determine answers to questions such as what makes your firm unique or different from other firms, or how your fund can be used in a portfolio. Then, be sure you're telling your story consistently across all of your communication channels in all mediums.
Key accounts: Many boutique firms lack team members who are dedicated to working with the gatekeepers of the various firms and databases. As a result, no one is in charge of understanding your top competitors on the platform or seeking opportunities to gain visibility. Some opportunities are no-cost or low cost once your funds are available on the platform.
Sales teams: There are many models of sales teams that include internals who set up meetings and provide support, externals who travel to meet with advisors, and hybrids who perform both internal and external roles. Compensation and management of your team will remain two major challenges.
Customer relationship management: The best way to turn contacts into relationships is by using a CRM database. You can also integrate your sales aggregation data into your CRM to keep track of sales flows.
Firms can also generate demand and support their sales teams through virtual wholesaling. Consider the following virtual methods to build advisor relationships.
Content creation: Develop commentaries, proprietary research, white papers and shorter blog posts that will interest your audiences. Videos are also becoming a popular method. Post content on your website or on other advisor sites; it can also attract news media and be used by sales.
Media coverage: Work with reporters that influence your target audiences to create stories that feature your people, products and brand. Good coverage can attract leads and add credibility to your other sales and marketing efforts.
Technology: Marketing automation software can keep your message in front of thousands of advisors at the same time. Webinars provide wide access to your portfolio managers. Social media are becoming popular ways for advisors to engage with fund firms.
Website: Your firm's web space can be a portal for information to engage your audiences. Media coverage, commentaries and videos, among other things, can be posted on your website to keep advisors coming back. You can also track which advisors are returning to pages on your website, and convert them to leads.
The most sophisticated distribution strategy won't help a firm with a lousy story. But a firm with a good story to tell can grow by thinking through goals and developing a strategy to get there. Then be sure to monitor and adjust throughout the year.
Dan Sondhelm is partner and senior vice president with SunStar Strategic.