Warren Enskat Group

As part of “The Seven Secrets of Distribution”, our team surveyed, spoke and met with over 1,000 professional fund buyers around the world. The book was published last month, but of course we are continuing our discussions on a daily basis.

Clearly, the post-crisis trend for institutions and distributors to move back to a ‘guided architecture’ setting to work more strategically with selected fund firms and use fewer, blockbuster, products, has also forcefully brought back the issue of brand in asset management.

Our research teams at Strategic Insight have been looking at the issue of brand for decades.

For example, following the tech bubble we published a research paper on “branding challenges for asset managers” in late 2002, noting “deteriorating equity prices and diminishing assets over a two year period have weighed heavily on the brands of most investment companies” (sound familiar?). Among the challenges then:

– difficulties of post-merger integration and re-branding of disparate units
and diverse financial services businesses, often with very different corporate and investment cultures, into one global brand;

– dilemma of how to brand for regional or global distribution and still preserve relevance and optimize positioning in local markets;

– how to brand new business lines outside of traditional areas of expertise, such as hedge fund units or HNW platforms – use the existing brand, create a “sub-brand”, or an entirely new brand?

– Branding for multi-channel distribution: the limitations and risks to managing
individual brands within multi-management platforms, fund of funds, supermarkets, and other growing third party outlets.

It brings back memories of Les Guêpes – plus ça change, plus c’est la même chose.
But we are not here to bring back the Research of Christmas Past, you can review that study at your leisure over some Glühwein.

We are here to see what professional fund buyers today think about brand and how relevant it is in their selection of strategic partners and blockbuster products.

Brand matters – more than ever. Post-crisis and post-Madoff, the reputation of a fund manager’s brand is often more important than the performance itself (very relatively speaking).

Thus, if distributors or institutions do not perceive a brand as positive (throughout the organization), the firm is either disregarded (best-case) or blacklisted (worst-case). A harsh business reality, as quite a number of organizations are still sorting through the loss of trust by clients over the last few years, but not a surprising finding.

More interesting is the fact that professional fund buyers (PFBs) differentiate clearly between what we in our 2002 paper referred to as “name recognition vs. holistic brand experience”, with its attendant emotional and aspirational elements.

In other words, is your brand the result of newspaper and billboard ads or is it the result of, as Scott Bedsbury coined it, “the sum of the good, the bad, the ugly, and the off-strategy”.

You may not be surprised to hear that most industry executives refer to brand as the former, another example of “lost in translation” (one of the seven secrets).

A dilemma, indeed, since almost all successful brands are the product of the latter.

Apple, Google, Facebook, YouTube. Powerful brands, because customers equate it with a specific – daily – experience.

Yes, Apple has cool ad campaigns, but the brand is defined around the products (iPadiPodiMac) and people (the Genius Bar, staff in Apple stores, Steve Jobs).

In fact, when you reach the state of neologisms, such as “to google something” or “let me facebook you”, you know a brand is strong.

Investment management got there, but “Madoff” just doesn’t have the same ring to it.

The brand bottom line in asset management post-crisis:

– Brand a key selection criterion: A strong brand is a key selection criterion for institutions and disributors post-crisis (definitely a force majeure, albeit not quite an act of God).

– Competitive advantage for independent fund firms: Independent asset managers have a (temporary) competitive advantage as many larger groups are still dealing with the impact of the crisis (rebuilding client trust, restructuring, et al). Many PFBs specifically state that they prefer independent firms where possible.

– Name recognition vs. holistic brand: Institutions and distributors prefer – by a wide margin – holistic brand (“I like the ‘grassroots’ element of their brand, calls, strong ongoing communication, direct access, …”) over name recognition (“yes, they have a strong brand, but mostly passively in newspapers, TV, billboards”), while industry execs often are still often measuring and focusing on the latter.

– The industry brand: Collectively, mutual funds with its key attributes (liquidity, accessability, diversification, transparency) enjoys a very strong brand in the financial services industry – for now.

The industry overall has missed an opportunity by not being more vocal about its competitive advantages and strengths – its brand. Instead of knocking out the opponent(s), they have been politely calling a time-out for them to recover; hedge funds, ‘newcits’, e.g. are now becoming a formidable threat, again.

As recently published in a Strategic Insight study for ALFI (“Alternative and Hedge Fund Ucits in the Next Decade”), these products now eclipse $160 billion within European Ucits Funds and are the subject of intense regulatory and industry discussion.

Newcits, Ucits, style, substance… brands all over again. PFBs are taking note. The Ghost of Christmas Past after all.

Happy holidays.