01 Apr Financial Services: At The Crossroads of The JOBS Act & The American Consumer Comeback
At the time of the writing of this post, the stock market is near an all time high and the business media seems to be whistling a happy tune about the comeback of the American Consumer. Earlier this year, according to Bloomberg.com Macys’, Target and the Gap reported sales that topped sales estimates in January, 2013. This past February, the Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 76.3 from 73.8 in January. Ernst & Young cited stronger global markets and calls the US markets “very positive” in its most recent forecast.
With rising property values and the job market strengthening, Americans seem poised for an uptick in wealth. In normal times, a wealth-effect makes things interesting for financial services firms. It gets more interesting when we couple it with the JOBS Act, which will provide hedge funds and other financial service firms the ability to market and in the process giving investors greater transparency. This will thrust more managers into the public and media spotlights, raising awareness of their firms and products. Public spotlight will also make it easier for investors to compare managers and options within their global investment strategies, heightening the competition for investment dollars between mutual fund families, private equity firms and hedge funds – including fund of funds.
While The JOBS Act is creating an unprecedented environment for hedge funds to market themselves, we believe there will be an indirect impact on related financial services industries like Mutual Fund Families, Wealth Advisory Firms, and perhaps even banks because the JOBS Act thrusts hedge funds into a more open market where they may have to compete with each other and other investment vehicles outside their class. Whether you’re a hedge fund, Fund Family, or wealth management firm, you may already know that institutional, accredited and non-accredited investors remain cautious because lessons from 2008 continue to loom large in the collective psyche. Those firms who understand how to develop effective strategies, and not simply employ marketing communications tactics and ride the American consumer comeback, will surely come out ahead.
Below are six ideas to help your firm navigate the tricky intersection of the JOBS Act and the American Consumer Comeback.
1. Brand Wisely Not Quickly – Financial services firms will now be enticed and encouraged to “brand your firm.” Keep in mind that savvy marketers understand that branding is a combination of “what you do” from a marketing communications perspective, how you perform, how you treat clients and a multitude of other variables that translates into how clients feel about you…this only happens over time. So “branding your firm” is not a product that you can or should purchase as a “branding program”. Branding is a multivariate process, but only those who understand this point will truly be on the way to effectively branding their firms and separating themselves from the competition. Keep in mind that it took decades for Vanguard, Blackrock, Fidelity, TRowe Price, The Man Group and others to become a brand. So, the time is now to build your brand’s foundation through strategies rather than tactics. As for hedge fund of funds, “Niche oriented hedge fund of funds that differentiate themselves by either focusing on a specific strategy, region, fund structure or investor type [and] …those fund of funds that can clearly articulate their differential advantage will be able to not only grow their assets, but command premium fees,” said veteran hedge fund marketer Don Steinbrugge of Agecroft Partners in his January 2013’s Post on AllAboutAlpha.com.
2. Be Ready To Compete Publicly and Transparently – Work from the digital world backward and understand that your web reputation is largely your reputation. So ensuring that your website speaks to the breadth and depth of the aspirations of your clientele and that your website is mobile ready is paramount to the success of your marketing efforts. Your collateral, key marketing messages, media and conference appearances, sales presentations, your website and social media platforms must be integrated. We would argue that outperforming your competitors is no longer based upon your market returns; it’s also based on how you are perceived in the marketplace, which has a direct impact on growth and asset under management. Certainly in the case of hedge funds, as the qualified investor pool grows, the more attention the media will pay to the industry, the more questions people will have. Consider Timothy Spangler‘s latest column on Forbes.com entitled The Simple Truth About Hedge Funds. The column attempts to introduce hedge funds to the general public by casting light on some of the perceptions or ideas that the public may have about the industry. It’s a natural cycle, as the media focuses more on hedge funds, hedge funds will have to provide answers – publicly in the media and in conferences – and privately as more potential investors are subjected to the same media messaging.
3. Be a Category Creator – In Why It Pays to Be a Category Creator (Harvard Business Review, March 2013), the authors found that “category creators experience much faster growth and receive much higher valuations than companies bringing only incremental innovations to market.” Researchers found that category creators, while only 13% of the companies studied, accounted for 74% of the group’s growth. Think of Bank of America’s highly successful breakthrough “Keep the Change Program” campaign. E*Trade and Raymond James, both of which are attempting to re-categorize their market based on the new investor and consumer realities. While there are plenty of reasons to discount this approach if you are a hedge fund, private equity or wealth management firm, consider that Fidelity recently went to market with “Get More Out of Your Investment,” where the investor can earn “up to a $2,500 deposit bonus when you open up and fund a Fidelity IRA or brokerage account or add to an existing one.” So, be creative, you may surprise yourself.
4. Marketing Is Here To Stay – Everyone will be marketing, it’s a matter of how you define it and make it work for your firm. For hedge funds and private equity firms for example, your digital reputation must be spotless because you may or may not have a front facing advertising campaign. Though, if you appear on CNBC, Fox Business, Bloomberg or speak at a conference and happen to catch an eye of an investor, be assured that it is highly likely, if not a certainty, that they will visit your website and Google your firm and you personally to learn more; this behavior works across the board from institutional to individual investors. Capitalizing on traditional media through digital redistribution of print, video and audio is one way of doing it. So are your integrated digital strategies in order? If not, take a look at PIMCO (yes the link to PIMCO’s twitter feed is intentional) as a best practices model.
5. Reposition for Value – E*Trade is doing it, so is Raymond James. Both firms seem to have understood that even with an anticipated wealth effect looming, the individual investor, and we would argue institutional and the accredited investor, are all demanding value. In their recent advertising campaigns both firms are appealing to the value-based investor suggestion that the firms will “keep less” and so “you, the investor will keep more.” We believe that the experience of the recent downturn continues to drive investor behavior from institutions to individuals. Just because the JOBS Act has opened the door, it does not mean that investors will be lining-up at it ready to do business. Investors will ask more questions and demand more clarity. Your firm’s value statement should be at the core of your marketing strategies.
6. Media: Not Your Father’s Oldsmobile – While the traditional media still has its lure providing a valuable platforms for financial services firms, the move to digital and self-owned media creation and distribution is the way of today and the future. Investors will seek information on their time and at their pace, something television and newspapers – at least in their current form – are not able to do yet. Also note that stories on the web, positive and negative, can go viral quickly, affecting your firm’s reputation as is the case with the New York Times most recent story about LPL Financial. In this new normal of mobile media world, firms who strategically position themselves for this reality and execute against it will outpace those who don’t.
Abe Kasbo is CEO of Verasoni Worldwide a fiercely independent marketing and public relations firm in Montclair, NJ.