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Fund Firms' Value-Added Adviser Programs Might Even be Helping Competitors' Sales


Surveying the investing landscape with an eye toward attracting new money on a large scale, most asset managers see the same things: a huge and growing IRA rollover market, the need for young parents to increase college savings and an aging Baby Boomer population fast closing in on retirement.

To capture these opportunities, asset managers are developing and rolling out value-added programs intended to solidify their positions with financial advisers and grow sales through this critically important channel. There is an obvious flaw to this strategy, however: not everyone can win. By failing to effectively tie the asset manager's branding and market position to a product or family of products, many of these high-priced initiatives may end up doing little more than boosting sales for a competitor.

Money Not Well Spent

We define value-added programs as information and tools used to grow a financial adviser's book of business, educate the adviser in a meaningful way and to facilitate the adviser's ability to meet client needs. The components include, but aren't limited to, printed materials, targeted websites, standalone calculators and dedicated wholesaler support. Nearly every initiative draws from these basic building blocks, though they alone do not define a program. Costs vary, with individual programs running anywhere from $10,000 to $50,000 and annual budgets often well in excess of $1 million.

In all too many cases, this is not money well spent. Take the example of a major U.S.-based asset manager that has invested years and millions of dollars establishing a market position as a conservative investor. It teams with a practice management expert to create a value-added program designed to help advisers build their business. The program they develop is a thoughtful one, well designed and straightforward.

The advisers are appreciative. They learn from the program and use their newfound knowledge to ... direct asset flows to other asset managers.

Programs targeted to women are also widely popular in the industry. These are often created to compensate for a firm's male-dominated marketing and advertising. Here again, however, advisers are likely to be agnostic in how they apply the lessons of these initiatives in directing client assets to specific products. If the product and message are not aligned, the effort is going to be counterproductive.

This doesn't need to happen. To avoid squandering resources, asset managers should take a hard look at the big-money markets to determine where they are positioned to succeed and where they are not, understanding how they are viewed in the minds of advisers. This will allow them to identify those areas where they may reasonably expect to attract new assets, and then to allocate marketing and support resources accordingly.

Once this decision has been made, there are a number of steps asset managers can take to make sure that their value-added programs achieve the intended purpose. These include using segmentation strategies to target advisers based on demonstrated preferences and behaviors and not simply by channel; continuing to strengthen the interaction between marketing and sales so that the programs that are created by the former are addressing a real need as identified by the latter; and putting in place the tools required to measure the effectiveness of every value-added program launched by the firm, with profitability as the single most important metric.

Relating to the Brand

For the numbers-driven, here's an interesting metric on value-added programs: 67% of asset management industry marketing executives are unsure of the worth of these initiatives as they are presently constituted. This suggests that millions of dollars are being spent on marketing based more on blind faith than on hard and fast analysis. The single biggest issue is the "me-too" quality of the programs. Or as one industry executive put it, "everyone tries to add value. The question is what value each firm should add."

That, of course, is a question each firm must answer individually. But whatever the conclusion, managers should be guided by a simple principle: leverage the qualities inherent in the brand. In doing so, they will naturally gravitate toward areas of product strength while avoiding look-alike programs. And they will happily see their program dollars going to support their own sales, rather than those of their competitors.

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