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Build a brand Bridge

The fund management business is dead, long live the fund management industry.

Recent weeks have seen a plethora of articles in the UK press heralding the death of the fund management industry as we know it. The evidence is pretty compelling. Ninety per cent of the value of funds is now in index-tracking vehicles, leaving the fund manager working with 10 per cent of the money.

They are under pressure to provide real returns on that 10 per cent and are turning to ever more complex, possibly risky and arguably niche products to help them – hence the popularity of hedge funds. Yet they still have been merrily charging an average 2 per cent management fee across the whole value of funds that they manage.

These facts are bad enough but it gets worse. The move of pension funds out of equity products to bonds, combined with the forecasters&#39 view that the equity market remains overvalued and will not enjoy the returns in the next 10 years that the last 10 years have seen paints a bleak picture.

Where has it gone wrong? What should they do about it? As a marketeer in financial services, I am not qualified to provide all the answers. But I do not find myself feeling particularly sorry for their plight, even though my own livelihood partly depends on their success.

From a marketing perspective, it seems they have generally refused to get to grips with some of the basics of marketing, allowing themselves to become distant and out of touch with the consumers they are there to serve.

Historically, marketing budgets have only been released in any volume when there are bull markets. Many of the sales messages have focused on performance designed to appeal to our avarice. And it worked. But while it proved good in attracting money, this approach failed to go very deep with consumers. Was it good marketing?

It turns out that many consumers were encouraged into products at the wrong time in the market cycle, somewhere near the top, resulting in poor returns – never quite getting those headline performance figures they had seen in the advertising.

It turns out that there was little else in this relationship between the provider and their customers.

It also turns out that consumers have little understanding or trust in these companies.

For the last 50 years, the strategy that fund management&#39s management have followed has been focused on the short term. We will only talk to consumers when it suits us. Why bother spending money on understanding the rather difficult thing called the consumer?

We will build a long-lasting relationship with a newsletter. We will worry about what to do with customers after we get them in. All surprising approaches, given that most equity products should be considered for the long term, 10 years or more.

Given the shift towards DC in pension provision, the institutions are increasingly only part of the target audience – the end-consumer has risen in importance. Consumers choose brands, consumers look for providers to help them make choices, particularly in product areas that are difficult to understand.

The gulf between fund management groups and consumers is gaping – brands should be the bridge – but many are at best only part-built.

For some it is too late. Those in the middle gro-und are rapidly being swallowed up by bigger groups, some being overtaken by new brands that are trying to do things differently.

But a ray of hope does exist. The fund management industry still has a few well established brands among consumers. So why not go and grab some valuable space in their minds? How? First recognise that over the last 50 years few brands have been created in this sector. Change the internal mindset – reappraise the commitment to marketing within the company. Then go out and meet and listen to the consumer, get to know what they want and then find relevant ways of connecting with them. It might be the best investment that is made in the next 10 years.

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