Expansion plans? Here's what firms should read

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Many successful institutional asset managers would like to convince financial advisers to offer their products to investors. But they often believe they can create effective marketing materials simply by repurposing the highly technical performance data they provide to consultant databases.

I advise them that this approach won't work, since RIAs and brokers use different criteria for evaluating and selecting funds.

To help identify knowledge gaps of their target audience that could impede their success, I gauge their understanding of these criteria by asking two questions:

  1. Do you understand their different business models? RIAs and brokers have different client service models, compensation considerations, and regulatory requirements. Gatekeepers within these firms have different entry requirements which can be costly.
  2. Do you know what drives their fund-selection processes? In addition to performance, RIAs look for funds with strong peer group rankings and research ratings, lower costs, proven risk management characteristics and a credible investment story. Brokers are motivated by these factors as well as by commission considerations.

Institutional firms that take the time to understand these differences are better prepared to develop marketing and sales strategies for funds that are most likely to be accepted on advisory platforms.

I've also been speaking with a number of European, Asian, Canadian and UK-based asset managers that are trying to generate inflows in the U.S. Many of these firms have well established strategies and funds with recognizable brand names in their current markets. But they often face cultural barriers that I help them identify with two questions:

Are your products positioned effectively? The factors that make your funds successful in your home country may or may not be relevant here. For example, in other countries funds are often sold as standalone investments. In the U.S., most investors choose funds that play specific roles, such as generating capital growth or dividend income or managing risk, within an asset allocation strategy serving a specific financial goal such as retirement, tax efficiency or wealth preservation.

Do your marketing and sales teams speak American? In addition to a lack of brand awareness, non U.S. asset managers must also overcome an America-first attitude among many investors and advisers. Building a sales team of experienced U.S. wholesalers with solid industry connections and hiring U.S, marketing experts to Americanize your marketing materials may go a long way toward tearing down potential cultural barriers.

When foreign asset managers ask me how long it may take to overcome these cultural barriers, I remind them that it took decades of advertising campaigns, good product reviews, and word of mouth to convince American consumers to buy European and Japanese cars. That's why I recommend that they focus their sales and marketing efforts on advisers, since investors are more likely to invest in a non-U.S fund recommended by a professional they trust.

In the past few years I've been approached by a number of asset managers asking for advice on marketing and public relations issues they need to consider when they're evaluating merger or acquisition opportunities. I always recommend that they take a step back and answer two fundamental questions before they sign any M&A agreement:

How do you determine whether an M&A candidate is a good fit? While the products, portfolio managers, senior executives, investment philosophy and audience segments of the two asset managers may be complementary, it's important to assess whether your mutual corporate cultures and values, information technologies, operations and client service processes are compatible enough that the merger process won't generate discord, disruption, attrition, and regulatory and reputational risk.

Do you have the right resources to manage communications before, during and after the transition? Investors, advisers, 401(k) plan sponsors, broker-dealers, the financial media and your competitors will want to know what is happening from the moment the merger or acquisition agreement is announced to the day the transition is completed.

Specifically, your best competitor may drop everything and pick up the phone calling your partner's clients day one. Do the marketing, client service, PR, risk management, compliance and sales teams in either firm have the experience and skills required to be effective change managers? The answer may very well determine who will keep their jobs in the combined entity and which roles they will play.

A lack of familiarity with the needs and challenges of a new market - or the potential challenges posed by an M&A opportunity — don't need to be more than temporary obstacles. If your firm has quality products, strong performance, a corporate culture that understands and embraces change, highly skilled communicators and a story that resonates with investors and advisers — then creating and implementing effective, targeted sales and marketing programs and public relations campaigns will go a long way toward fulfilling your firm's expansion plans.

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Digital marketing RIAs Independent BDs M&A 401(k) Sales Business development Strategic plans Dan Sondhelm Sondhelm Partners Money Management Executive