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You might imagine that as the Perfect Storm of Q1 2003 continues to rip through the investment industry with devastating force, few players would put on their waterproofs and go out into the sodden landscape with Isa consumer campaigns.

You would be right up to a point. Quite a few players are conspicuous by their absence. But there are rumours that some of them will give it a go as the deadline gets a bit nearer. And quite a few players are out there, at least to some extent, already.

In much the same way that a few hardy holidaymakers will brave howling gales and horizontal rain to walk along the front at Brighton or Blackpool, a few hardy fund managers are braving the worst investment conditions for 70 years to run campaigns of posters and big press ads.

There is plucky New Star, wrapped up in a plastic mac and grappling with a large fluorescent-pink umbrella, singing the praises of its income funds in a voice hardly audible above the sound of the giant breakers crashing over the sea wall.

Here comes good old M&G in wellies and sou&#39wester, with a campaign that pays such elaborate tribute to the investment skills of Cazenove that you almost wonder if someone at Cazenove is holding some M&G directors&#39 children to ransom.

And over there, look, sheltering by the bandstand, isn&#39t that the sodden figure of Legal & General shouting about no initial charges, only to find the words carried away on the wind?

Apart from sheer raw courage, there are only three possible reasons why these and a few other fund managers are carrying on with this kind of activity. They do it:

•As part of their direct-sales activity.

•To maximise sales through the IFA channel.

•To build brand awareness for the future.

To take them in turn, I think we can safely dismiss the first reason. No one is generating any worthwhile level of business in the direct Isa market at the moment.

The cost of acquiring new customers has reached a point where it might be better for fund managers to go into the street and offer consumers £1,000 in used fivers, on the condition they must be willing to put it into an Isa for at least a year or so.

At risk of stirring up controversy, I have never been hugely convinced by the second reason. OK, there are a couple of fund managers, both as chance would have it with connections to a certain Mr J Duffield, which have found a role for very high-profile, very expensive and very unsubtle consumer advertising as an essential element in whipping up what one might call a furore of excitement and support from the IFA community.

But for most players, I have always thought that the idea of advertising to the consumer in order to win the support of the IFA is an awfully expensive and roundabout way of pursuing your objectives – a bit like handing out expensive bunches of flowers to complete strangers in the street in order to persuade your wife that you are a kind and generous person

The third possible intention behind 2003 ISA activity, though – building a brand for the future – seems to me to fall into a very different category from the first two. It is a category one might describe as “sensible” and “forward-thinking”.

The fact is that the investment industry is now entering a period of fundamental structural change, in which tried and tested sales and marketing models are likely to get very out of date and new approaches will become much more effective.

Consider a few random observations.

The direct-from-the-provider model is pretty much dead, and is unlikely to come back to life in anything like the same form.

We are going to have to find some way of attracting people to funds other than by making past performance claims. We have not got any claims, and even if we had the FSA would not let us shout about them.

The whole world is going open architecture. Choosing a particular product will not imply choosing a particular fund manager.

In the years after depolarisation, “cottage industry” IFAs will fade from the scene and the advice industry will gradually become dominated by a small number of powerful national distribution businesses.

Oddly enough, I would argue that, contrary to appearances, all these trends – and others besides – point in the same direction. In different ways, they all support the idea that right now, for the first time, there is a strong argument that if you want to succeed as a retail investment funds provider (and arguably as a DC institutional funds provider too) it would be a good thing to invest in building a great big strong famous well-known well-liked brand.

How can this conclusion can be drawn from my four observations?

Well, the first supports my view in a pretty basic way. Quite simply, if the direct-from-the-provider direct-sales model is dead, then we have a budget that we can think about reallocating. OK, there may be the odd product, and the odd highly targeted prospect list, which, when combined, can still deliver a profitable direct marketing outcome. But there will be very, very few of these. Might there be something else we could more usefully do with the budget – like build a brand?

As for the second point, moving on from the brutal simplicities of past performance claims is a huge challenge for the industry. It is as if holiday romance gigolos, reliant for decades simply on the appeal of their tight trousers, are suddenly forced to wear loose-fitting robes and make strenuous efforts to promote their delightful personalities.

It sounds unlikely but there is a bit of encouraging evidence that it can be done. In place of quartiles, rankings and numbers, it is possible to create engaging, appealing brand personalities which investors and advisers think they would like to deal with.

M&G is doing it, at least when it stops worshipping at the shrine of Cazenove. And so, I would argue, is my agency&#39s client Isis.

My third point was open architecture. This applies to a wide range of investment environments from DC pensions to individual life products to fund supermarkets.

True, in many of these environments, the distributor will also undertake some kinds of assembly role, providing balanced portfolios, cautious portfolios, income portfolios, etc.

But in many cases the investor will have the opportunity to make his or her own fund choices. And the dominant factor in shaping those choices will be brand perceptions.

Fourth and last, I mentioned the changing balance of power in the relations between providers and distributors.

The fact is that the evolution of powerful distributor brands is always bad for manufacturers, as we have seen in sector after sector of the UK retailing economy. The most difficult sector of all now for manufacturers is, of course, food retailing, where four giant distributors now account for nearly 70 per cent of sales.

Manufacturers have few effective weapons with which to resist retailer power but strong brands are among the few. If Tesco believes it would be bad for business not to stock, say, Persil, or Whiskas, or Nescafe, then the brand owners are negotiating from a positioning of some strength.

All these reasons, and others besides, start adding up to a powerful case in favour of building investment management brands.

There is a lot to do. Leaving aside names that are well known from other financial activities – such as Scottish Widows or HSBC – there are arguably only four specialist investment businesses which could be said to have made much progress in brand-building. These are Fidelity, New Star, Jupiter and probably the rejuvenated M&G.

The investment industry remains so absurdly over-supplied that there are well over 100, probably getting on for 200, other organisations in a much less happy position.

Some – the likes of Lion-trust come to mind – probably believe they can skip all this brand-building malarkey and rely indefinitely on advised business. They may well be right. For many others, though, no such option exists – it is starting to look a bit like the choice is brand, or die.

So, yes, it is horrible out there on that seafront. It is cold, wet and windy and within 20 minutes you will be chilled to the bone and soaked to the skin. Still, it is probably best to get out there. You don&#39t want the enemy stealing a march on you.


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