The investment management industry is going through a period of significant structural change that has fundamentally altered the environment for investors. In particular, the rise of index-tracking funds - and the associated flow out of traditional actively managed funds - have had a major impact on established business models in fund management.
This article highlights the significant impact of the trend in flows on management companies. While the biggest change has (so far) occurred in the US, it has certainly not escaped its European counterparts. Subsequently, there has been high levels of M&A activity and sector consolidation as businesses attempt to build scale and fight fee pressure.
What does this mean for marketers?
In a world where firms are having to work ever harder to gain and maintain investors, there is severe pressure on brands to demonstrate their worth in a client's environment. This means that marketing arguably has a more important role to play in helping investment managers differentiate in a cluttered space.
In practical terms, this has several implications, among which:
· Businesses have to be crystal clear about their brand identity and able to articulate how their difference benefits their clients;
· There has to be concrete evidence behind messages, as investors are far more questioning about managers' ability to deliver on performance; and
· Firms have to do more with fewer resources to reach their target audience in an efficient manner.
For many large established investment management businesses, this represents a major departure from the way they have operated in the past. In the race to justify their fees, some have been revealed as akin to the proverbial emperor without clothes: charging hefty management fees for years without adding value.
When fund performance comes up short of the benchmark - and clients are having to pay for the promise of market outperformance - they have proven that they are not scared of voting with their feet.
This emphasises why marketers have to be well attuned to their firms' sales objectives and produce material that differentiates their business and demonstrates why the business deserves a place in a portfolio.