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Fund Forward

Rule 22c-2 Offers Funds Great Marketing Prospects

While the mutual fund industry has wrangled over, and largely resisted, the logistics and the estimated $617 million cost of complying with Rule 22c-2 for the past three years, funds should actually view the perceived regulatory onus in a new light: As a tremendous marketing opportunity.

Since the rule is designed to require fund companies to partner with sales intermediaries to monitor for market timing, it could give them, for the first time ever, details on the 145 million underlying shareholder accounts, representing 35% of the mutual fund industry, held in the omnibus accounts that these brokerages, 401(k) plan sponsors, registered investment advisers and bank trust departments handle.

After all, Rule 22c-2 essentially gives fund companies the rights to investors' names and addresses, taxpayer identification numbers, the amount and dates of purchases, redemptions, transfers and exchanges. It would be foolish of them to rescind these rights and let them rest just beyond their reach.

A new report on outsourcing from PricewaterhouseCoopers makes the point, noting that Rule 22c-2 gives funds access to "a treasure trove of data they can mine to market directly to customers."

The information could be a fantastic stimulus for the mutual fund industry-but no one seems to be talking about it. Thus, rather than simply comply with the Securities and Exchange Commission's amended version of the rule, which permits fund companies to go half the distance and obtain information-sharing agreements with first-tier intermediaries and leave the burden of monitoring the underlining shareholder accounts to them-it might be worth the time and trouble for fund companies to go the extra mile and tap into that information so that they can build customer relationship management (CRM) software, advertising campaigns and direct marketing tools.

So far, the industry's trade processing partners seem to have been focusing on the ability of their systems to merely comply with the letter of the law. If they don't have the imagination or the ability to market the power of the information they possess, perhaps they should partner with a software or CRM company to highlight its value.

After all, the end intermediaries probably don't want to share their valuable customer information with mutual fund companies. They also don't want to incur the added cost of doing so.

Thus, it's up to fund companies' trade processing partners, or the mutual fund industry itself, to pursue it.

(c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

http://www.mmexecutive.com http://www.sourcemedia.com

Recent Posts

Mutual Funds Must Go High-Tech-v. 3.0

Over the last number of years, mutual fund transfer agencies and shareholder communications companies have tried to convince shareholders to accept paperless summary prospectuses, proxies, trade confirmations and electronically stamped signatures. Fund supermarkets and web home pages have broadened their horizons to include market commentary, videostreaming and personal financial news. At the same time, exchange-traded funds, funds-of-funds, hedge FoFs, unified managed accounts, target dates, 401(k) auto enrollment and heightened awareness among people throughout the country of the difficulties of being retired-have taken off.

Test of the Massey Mine

Fund giant boards of directors at AllianceBernstein, American Funds, Fidelity, Vanguard and others are reportedly starting to bring about meaningful change in the corporations in which they are invested. Proof should come any day now, when the shareholder proxy votes from the annual meetings are released. Fund chief executive officers spoke about the power and influence their proxies wield in an interesting Reuters article last week, "Mutual Funds Seek to Shed 'Rubber Stamp' Tag."

Milestones

In 2011, 401(k) plans will turn 30, but the milestones the mutual fund industry has reached in this time are but a nanosecond in the history of U.S. retirement policy. Executives we interviewed for this special edition of Money Management Executive for the Investment Company Institute's meeting in Washington, speak to important milestones of the recent past and into the future. Look inside for observations and forecasts by Ted Benna, Robert L. Reynolds, Dan Fuss, David C. John, Steven Miyao and others.

At Age 30, It's Time for a Revamping for the 401(k)

This year marks the 30th anniversary of the 401(k), the revolutionary retirement savings vehicle that has been annihilating pension plans, empowering individuals to take part in the stock market-and, sadly, that left retirees with the misfortune of leaving the workforce in 2000 or 2008 very badly off. The cracks in the system are prompting many asset managers, regulators and retirement experts to take a hard look at 401(k)s and how they can be fixed.

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Lee Barney

Lee Barney served as editor of Money Management Executive from 2002 to 2010. Previously, at United Media’s Wall Street & Technology magazine and Risk/Waters Information Services, she covered financial IT. For TheStreet.com, she wrote the daily “Meet the Street” column covering a broad spectrum of market-moving events. Lee began her career as a reporter in Tokyo with The Japan Times and was executive editor of Spotlight magazine.