Posts Tagged ‘financial advisor marketing’

All bets are off in the race for financial services AUM in about five weeks, when hedge funds and private equity companies formally gain the right to market directly to potential clients. That’s when the provisions of the JOBS Act that lift the ban on hedge fund and private equity advertising become effective. These rules were formally approved about a month ago by the federal Securities and Exchange Commission.

There’s been a lot of speculation about exactly what hedge funds and private equity companies will do when they can advertise and market, which could be anything and everything including:

  • Celebrity endorsements
  • Billboards
  • National advertising campaigns
  • Direct mail and email solicitation
  • Fancy dinners, conferences and seminars

It’s all likely, but what hasn’t been discussed as much is the impact of the entrance of extremely well funded entities who are set up to compete with financial advisors, financial services companies and asset managers for a limited pool of high net worth, ultra high net worth and institutional assets. There’s a limited pool of these assets, and competition is already fierce among companies that have the right to directly market and advertise today.

Imagine what it’s going to be like in a few years when extremely well funded hedge funds really get their arms around what they can do and hire the brightest and the best Mad Men to formulate and execute a marketing strategy for them. While all healthy financial services firms have money to burn to a degree, hedge funds charge fees far in excess of what other asset managers can charge and they also have the ability to lock up AUM so that it can’t flow out in the same way that it does with mutual funds and financial advisors.

If you are currently seeking to gather AUM, you better watch out. These guys are coming and they have the ability to suck all the air out of the room so that there is even less space for other messages. In an already noisy atmosphere, it will be even harder for potential clients to distinguish your message from all the others out there.

That means if you don’t have a clearly defined ideal client type and a plan to attract those clients to you, you better get moving. Time’s a wasting…..

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coke.photoConnecting with potential clients by telling your story in an engaging way through content marketing is the way to go today. It may not be easy to envision exactly how content marketing can work for you or what’s happening in the space. Here are some examples of great content marketing innovation and links to blogs and sites that can help you imagine and explore the boundaries of what you can create for your financial advisory practice via content marketing.

At the American Society of Journalists and Authors Conference last week, I learned about companies that are innovating in this space, including:

  1. Coke: Last Fall, Coke relaunched it’s website as Coca-Cola Journey, a digital magazine. Instead of focusing on static branding and information, the site provides interactive info that tells the story of Coke via a variety of channels including bloggers offering thought leadership and a ton of cool content marketing in a variety of formats from video to social media to infographics. This interview with Ashley Brown, director of digital communications and social media for Coke, published by the Custom Content Council, focuses on Coke’s story and how it is told through the new site. 
  2. IMB: Midsize Insider is a digital interactive content site designed to offer information to small businesses about technology issues that affect them and potential solutions. IBM is not pushing it’s own products and instead has hired thought leadership bloggers in the space and journalists to tell it’s story. The site covers a number of topics in a variety of formats, including mobile, social business, cloud computing, business analytics and security.

Check these sites out and think about what they are doing — they are offering a wide variety of content in different formats. While your financial advisory business isn’t likely to have the ability to match the depth and breadth of these offerings, they are a good example of what can be done and may encourage you to think creatively and outside the box.

Advizent, the once-promising RIA marketing and branding consortium, was shut down last week by founders Steve Lockshin and Charles Goldman, Financial Planning magazine reports. They cited a lack of support from potential members and an unwillingness to take on outside capital as the reasons behind the decision to terminate the venture.

Sources quoted in this article and several others, including in RIABiz and Investment News, cite a number other reasons for the failure, including:

  • Unwillingness of RIAs to cooperate with each other
  • The high level of fees sought by the Consortium
  • Inability to provide a compelling ROI
  • Competition from other marketing and branding efforts
  • Lack of foresight in regarding to branding by RIAs

Advizent sought to create a marketplace that would match consumers with RIA firms, who would be rigorously pre-screened for ethics, compliance, succession planning, strategic planning and other characteristics. Consumers, attracted to the site via national marketing and advertising campaigns, would have been presented with Information about member firms and would have been matched with firms meeting their specific criteria.

I agree with some of the assessment in the articles exploring the reasons for the firm’s demise: for advisors to pony up the type of money that Advizent was seeking in return for a potential fuzzy pay off of consumers being directed to their firms via a website just wasn’t compelling enough. Then, there’s the fact that many advisory firms are far from sold on decent, let along large, budgets for marketing.

Add to the fact that RIAs are independent by nature and may have been wary of what they saw as a cookie cutter solution that didn’t stress individual differentiators enough, and the venture just didn’t have enough support in the industry to get off the ground.

I also believe that the venture ultimately didn’t succeed because this isn’t the best way for RIA firms to differentiate their brands, and RIAs sensed this. As I’ve written previously, in this day and age of fragmentation of the traditional media, advisory firms can best differentiate themselves via thought leadership targeted to a specific ideal client type. Savvy advisors are putting their marketing dollars into these kinds of content marketing campaigns and realize that they can best attract clients that will already meet their criteria — cutting the length and expense of the client acquisition cycle — by stressing their differentiators.

A pitch to the masses (even masses of high net worth investors) via a branded website isn’t what these firms need, and it wasn’t likely to generate enough business for member firms to justify the fees even if it did scale up and garner a decent following among consumers. Selling financial advice is becoming less and less like selling a car or a widget and  Advizent’s nascent offering may have seemed too much like mass selling with too little potential for differentiation for member firms.

The evolution of the financial advisory industry is still in a very early phase. It’s too much like the Wild West for this type of consortium to succeed. The day may come when advisors — and consumers — will be more receptive to this type of branding model, but it’s a ways off.

When the SEC issues it’s yearly National Examination Guidelines detailing what its examiners will look for in audits of the more than 11,000 federally registered investment advisors and 800 investment companies, prudent advisors pay attention. While it’s unlikely that you’ll get examined if you fall into this category given the SEC’s limited resources, the guidelines are very informative in terms fo what issues regulators are paying attention to in any given year and how perceptions of risk are evolving in the financial advisory space.

As reported by Financial Planning magazine this morning, risk around conflict of interest is an ongoing priority for the Commission because conflicts of interest tend to arise constantly and change in nature. Examiners will be looking for specific conflicts of interest, what advisors are doing to mitigate and disclose those those conflicts, which can be particularly challenging for larger advisory firms. During examinations, staff will be analyzing financial and other records to identify compensation arrangements that aren’t being disclosed to clients, which may include:

  • Undisclosed fee or solicitation arrangements
  • Referral arrangements with affiliated entities
  • Receipt of payment for services allegedly provided to third parties

In terms of marketing, the SEC is looking at how advisors market, specifically around performance numbers. The SEC wants to ensure that all advertising of performance numbers is accurate, including that of hypothetical and back-tested performance and will look at assumptions and methodology, disclosures and compliance with record-keeping requirements.

The SEC’s other priorities in examinations include fraud detection and prevention, technology and corporate governance and enterprise risk management.

The take away for alert advisors? Analyze your practices and processes in these areas to make sure you meet or exceed the SEC’s standards. Talk to your team about potential conflicts of interest and make sure anything that even remotely might look like a conflict is disclosed to clients, whether it would draw a second look in an examination or not.

Whether you are likely to be audited or not, adopting best practices and evolving your practice to meet the highest standards possible is the best route to gain trust with your clients, potential clients, referral sources, employees and other stakeholders.