Spreading the word

Devising the right strategy to communicate with distributors of investment products is essential for fund firms and asset managers wanting to succeed in this increasingly competitive market. “Increasing brand awareness is absolutely critical to our development,” says Michael Jones, head of financial institutions at Fidelity International, which aims to make products available to the broadest-possible audience.

Large banks and insurance companies require products of third-party fund managers they distribute to be well known to end investors, says Mr Jones. That means that in markets like Italy, Spain and Germany, where Fidelity has a predominantly mass distribution approach, large amounts are spent on advertising. “You can never ease up on the brand,” admits Mr Jones. “We will spend more money on brand in the UK than any other market,” he adds, even though this was the first market in Europe conquered by the American group.

About 35 to 40 per cent of Fidelity’s promotional 2008 budget is being spent on “above the line” advertising, include TV and radio, web and internet banner ads.

However, the greater proportion is spent on training, education, wholesaling, marketing literature and events, estimates Mr Jones, with a heavy burst of promotion accompanying any new product launch. “The great art of this business is to ensure that you keep talking about good products,” he says, mindful of the need to differentiate a Fidelity fund from its 35,000 fund European peer-group. “There is so much noise that if you’ve got a really good product, you can’t just talk about it for the month that is top decile; you have got to be talking about it consistently.”

In the wealth management space, brand name is much less important, says Mr Jones, with the industry becoming increasingly data driven, more sophisticated and more targeted. “There is a relentless rise in the power of gatekeepers - those who select which products a private bank or a wealth management arm of a bank will use. They are recruiting bigger teams, which are more sophisticated and much more analytical.”

This trend has had a strong impact on the way Fidelity approaches the wealth management community. “We have been very good at talking to the retail buyers, less to the wholesale end of the market,” says Mr Jones. “So in the last year and a half we’ve put a lot of effort into tailoring our message to that sophisticated audience on a much better targeted basis.”

Polarised service

One example of the new policy is building websites specifically for wealthy managers, including much more data-led content. Fact sheets are also being updated to include more analysis and sophisticated data, while wealth managers are being showed more detailed information on portfolio holdings. “That’s very different to providing a fact sheet to a bank based adviser,” says Mr Jones. “This will carry on. You will see a polarisation of service between mass market, distribution and the wealth management community.”

This demand for data from fund producers is also confirmed from the distribution side.

When distributing its ?40bn in funds of funds products to Germany’s 400 savings banks, DekaBank offers two distinct product lines. The first one, which includes DekaBank products together with those of its ten long-term strategic partners, provides the Sparkassen savings banks with a choice of 1000 funds, all of which can be potentially offered to investors.

In reality - as this would be way too much for the average consultant of the savings bank to peruse - within this selection, Deka chooses 40 funds which are explained in detail in the monthly brochure.

The second product line includes 7,000 funds sourced from the whole fund universe available in Germany, to meet demand of those clients requiring total open architecture.

In terms of information required from external providers, DekaBank has tough standards.

“We expect pretty much from our external providers. And from the feedback we get from the different fund firms, we know we expect more than our competitors. What we ask is that they open their book for us, as we want to see all their holding on a weekly basis,” says Steffen Selbach, head of DekaBank’s fund of funds business.

‘The great art of this business is to ensure that you keep talking about good products’ - Michael Jones, Fidelity International	‘In an international scenario where all groups of an important size have similar weapons, brand becomes the distinctive element’ - Marcello Calabrò, Pioneer Investments	‘We will never be able to compete with the marketing budget of large companies, so we try to be clever and be credible in the core areas we want to be in’ - Philippe Leroy, Raiffeisen Capital

By recieving all the data of the fund holdings on a weekly basis up to the single stock or bond that the manager has invested in, Deka’s fund researchers can always see how a fund manager has repositioned a fund. “This way, we can get a lot more information on what the fund manager thinks, what he expects from the market, if he is likely to see market turns before they happen or if he is much more a follower of the market trends. This is the way we do our business here, we want to see the data and make our decision from there,” says Mr Selbach.

Deka is also strict in controlling the communication flow from strategic partners to the savings banks, in terms of marketing new products and also in terms of training.

“We forbid our partners to train our sales people,” he says. These are trained mainly by the fund research team. “We are the main provider of fund solutions to the savings banks and we have made an arrangement with those partners that they have no right or possibility to approach the saving banks directly.”

Products are channelled through Deka’s sales people, who speak to the savings banks. Equally savings banks wanting to have information about specific funds, have to go through Deka’s sales force, he says.

INTERNATIONAL DISTRIBUTION

For a mid-sized company like Vienna-based Raiffeisen Capital, which entered the international distribution game through third-parties at a later stage, the key objectives are to achieve market visibility and to focus customers on the group’s core competencies.

The firm manages ?43bn, of which more than ?6bn has been distributed in its four core markets of Italy, Germany, Central and Eastern Europe - where the bank leverages on its captive distribution across the region - and France. In 2007, following strong directions from the management board, assets from international distribution grew by 80 per cent.

“Assets are growing much faster internationally than in Austria,” says Philippe Leroy, the Austrian company’s head of sales and marketing for the French market. “The brand is obviously an important aspect of it. But we have been quite reluctant until now to run large advertising campaigns. We will never be able to compete with the marketing budget of large companies, so we try to be clever and be credible in the core areas we want to be in, which are emerging market equities, global bonds and absolute return.”

Performance

The best ambassador of a fund company’s brand, he adds, is always performance. So it should be a function of the group’s international marketing muscle to ensure funds are represented on the databases of Lipper and Morningstar and entered for local, country-based awards competitions.

This helps to differentiate companies which are becoming increasingly similar in terms of product ranges, risk monitoring and management structure. “In an international scenario where all groups of an important size have similar weapons, brand becomes the distinctive element,” believes Marcello Calabrò, head of international marketing at ?260bn funds firm Pioneer Investments, owned by Italian bank

Unicredito. “But Promoting the brand means conveying the concept of trademark encapsulating a number of specific messages and emotions to communicate to distributors and clients.”

This is increasingly more significant now, as distributors tend to work with selected strategic partners and the type of service and reliability that the investment process gives becomes a key determinant, says Mr Calabrò.

Currently, Pioneer is working closely with branches in its proprietary Unicredit banking network, emphasising the importance of having within the group a player of international dimension, compared to a local or boutique manager. This follows internal research showing that portfolios of many Unicredito clients are poorly diversified with an excessive bias to Italian or European investments.

“We are showing professionals at Unicredito how the efficiency of their clients’ portfolios could increase by including a component of emerging markets,” says Mr Calabrò. “In the end, we get to the product offering, but we start from a concept of brand, which conveys the international dimension, and our bottom up knowledge, thanks to the analysts in the territory,” he says.

Training is an integral part of communicating with distribution partners, says Mr Calabrò. Understanding the fund management techniques make the bankers understand exactly what they are proposing to clients. “This knowledge, even in moments of underperformance or market downturns enables them to have more grip on their clients and not make decisions on an emotional wave,” he says. “The examples of success that we have had with distributors are perhaps all linked to this factor, to being very open and transparent and giving them information and knowledge that place them on the same level with us. This way they can manage the relationship with the client in a much more confident way.”

The communication process seen by distributors

The private banking arm of Fortis, has made it a priority to communicate with external fund providers. “One of the key things that we have tried to make clear to them is that we have a dedicated team for fund selection,” explains Pim Mol, member of the global management board at Fortis Private Banking. “We don’t want them to go all around the whole private bank and try to sell their products to everybody.” Instead of helping them, this scattergun approach plays very much against outside groups, he says.

Last year the Belgian private bank made a deal with Standard & Poors, in order to be able to access their global fund research. From a best selection of 1200 funds, which S&P sources from the whole universe, the bank’s research team narrows down the chosen investment funds to 200, which are then made available to Fortis’ private clients.

“We see ourselves very much as selectors of the best banks and we very much take into account in our selection process the way we have been serviced hands-on in times of trouble,” he says. “For example, in the recent market turmoil, within a couple of days we were able to provide our clients a hands-on view of what all our key funds selected had done in their portfolios, or how the managers of these funds viewed their portfolio. Being serviced in those moments is crucial to us.”

When dealing with external players, the commercial department of the asset managers do a lot of the “nitty gritty.” However, Fortis Private Banking still finds it extremely important to meet the manager, back office and compliance people as part of their due diligence process.

It is also important to see that the brand of external partners is extensively advertised. “In that way, we can connect as Fortis, also with strong brands,” says Mr Mol, adding that 50 to 70 managers, from boutiques to established houses, are included in their selection.

“Private banking clients go one step deeper in the perception of the brand,” says Mr Mol. “While for retail clients it is very much a question of familiarity with the brand, for private banking clients it is all about the added value next to the brand, the performance, the manager, the style.”