Most investment companies have cut their advertising budgets over the last four years. Findings from ad agency MMS showed that national press advertising by fund firms sank from £37.9m in 2000 to £6.9m last year following the implosion of Isa sales.
New Star has bucked the trend, continuing with advertising since its launch in July 2001 regardless of unforgiving market conditions. Industry sources suggest its spend for 2004 will be around £3m. Marketing director retail Rob Page says: “If you stop advertising one year, awareness levels fall not by 20 per cent but by 90 per cent.” He believes advertising strat-egies by some fund firms have followed the same flawed logic as wary investors – they have drawn back when markets are down.
These firms are likely to be paying a premium for advertising at a time when rivals will also be vying for attention. Page says: “Many fund management companies see advertising as a discretionary spend against other rigid fixed costs, explaining why so many have cut their ad budgets.”
Hargreaves Lansdown investment manager Ben Yearsley believes New Star's success may in part be because its ads were in the right place at the right time. “New Star seemed to be everywhere – billboards, national press, trade press, all throughout the bear market when everyone else was pulling back,” he says.
Chartwell investment analyst Ryan Hughes says: “There is nothing particularly big or clever about New Star's ads, they are extremely in your face but have helped build brand awareness.”
Fidelity also continued to advertise throughout the bear market but it has reduced its budget this year. Head of brand and advertising Betty Gleave says: “Our strategy has been to keep a consistent presence, including sending reassuring messages to investors when markets are low. That said, when people are not buying, there is no point in upping your ad spend.”
Selestia marketing director Bill Vasilieff says advertising is important if a company is selling direct to the public. He says: “For sales coming through the IFA channel, it can make advisers' lives easier if the client has already heard of the brand. How much easier is very difficult to say.”
Selestia does not run blanket ad campaigns or ongoing brand-building exercises but is most likely to spend its budget of no more than £250,000 to draw IFAs' attention to particular achievements, such as a recent award.
For some companies, the relationship between mass brand building and sales is not convincing enough. Scottish Widows Investment Partnership relies largely on direct mail and advertisements in the trade press which target intermediaries. It may run two or three campaigns a year rather than blanket coverage throughout and has no plans for billboards.
Poor investment conditions coupled with the difficulty of proving the effectiveness of campaigns are largely to blame for the change in fortunes of advertising but many feel new FSA advertising rules cannot have boosted the chances of recovery. From June, the use of past performance in advertising to investors has been banned unless it is used within strict boundaries which standardise the presentation of fund data. Fund firms have been forced to think a lot harder about their advertising messages.
Page says: “On a billboard, it is impossible to show five discrete years. Our advertising is more about investment messages and not looking as if certain returns are guaranteed although we maintain that looking at past performance is important, so long as it is presented in a balanced way without cherrypicking.”
He says New Star attributes its sales success to having the right funds at the right stage in the economic cycle, as well as promoting the investment freedom of fund managers in its ads.
Advisers seem to believe direct consumer ads are effective in boosting sales but are less convinced of the impact of campaigns specifically targeted at them. Bates Investment Services head of investment strategy James Dalby says advertising direct to the public does not generate client traffic but fund managers that invest in brand awareness campaigns are more easily received when their funds are discussed by advisers.
Dalby says brand building might not be as persuasive as positive editorial coverage in personal finance sections of national newspapers.
He says: “The impact of advertising versus good editorial is finely balanced, the strongest combination probably being when an ad campaign is backed up with strong comment.”
Direct advertising is a worthwhile exercise, from Yearsley's point of view, but, in common with many investment IFAs, he believes he is somewhat impervious to the power of advertising.
Gleave makes the point that while most consumers will argue they are not swayed by advertising, across all sectors, sales figures might tell a different story.