Feet on the street for smaller funds

by Marilyn Dale

At Huntington Asset Services recent client conference, we heard from two third party marketing firms about trends in mutual fund wholesaling.

Tony Poleondakis

Tony Poleondakis, Sales Director, Piedmont Capital Distributors, shared a great analogy that we paraphrase here:

Imagine you’ve invented the best ketchup on earth; it’s absolutely amazing with French fries. And, let’s even say you got the local grocer to put it on the shelf, right next to Heinz. Chances are no one will buy it. Why? Because consumers don’t know your brand, they don’t know your story and they have no idea your ketchup is better. Unfortunately, no one walks through the grocery aisle sampling all the condiments. But imagine if the ketchup rep was right there, offering free tastes on hot fries.

Tony’s point was that even if you have one of the best mutual funds available, unless you’ve got feet on the street meeting with advisors and letting them know you, who you are, what you stand for and how you’ll help their investors, it really doesn’t matter how good your strategy or even your performance are. Performance isn’t enough, in fact “performance is only conspicuous by its absence.”

Tim Dolan

Both Tony and co-panelist Tim Dolan, Managing Principal, Dolan Capital Group, agreed: an advisor’s success is not really based on finding the best mutual fund. Rather, it’s about charming people to give them their money. And it’s up to you to help build relationships with those advisors and make sure they know you, what your firm stands for and your products.

Low-touch marketing isn’t enough. Virtually every fund is trying to get in front of the RIA community. There is information overload about mutual funds, separate accounts, research reports, compliance updates and more. So, to be successful, the panelists recommended the following:

• Ensure you have some elements of a unique value proposition
• Target advisors, not the home office. There may be conflicting agendas.
• Know the costs and be prepared to commit.
• Wirehouses require typically about 10 bps ($75,000 to $125,000). Know that Merrill Lynch, at $60 billion in mutual fund business, does about twice the volume of the next competitor.
• Select lists may have additional “pay to play” charges.
• Determine which channels are appropriate for your fund and find out what they look for. You cannot be all things to all people.
• As a smaller fund, stay focused, be patient and focus on the sales agreements you have, not those you don't yet. Consider if you’ve really called on every “insert RIA firm name here” in “insert geographic area.”
• Look for selling efficiencies. For example, with LPL you’ll spend a lot of “windshield time” going to 10 different branches, whereas with firms like Caderet, Grant, you may be able to see 20 people in one office.
• Target the corner office. It will take just as much work on your part to develop a relationship with a $10 million producer as with a $1 billion one. Advisors in the $500 million group may be the friendliest to a boutique manager and have analysts on their teams to understand how you lower risk or improve performance.
• Remember, today’s FAs are NOT money managers. The best FAs are asset gatherers who are measured on new clients and new assets.
• Your sales effort needs to be consultative, leading with “how can I help you help your clients” or “help you grow your business,” not lunch and golf.
• Provide educational materials they can use with their clients so they can enthusiastically retell your story.
• Figure out who your customers really are -- chase down every trade. If you can't afford an outside sales force, at least respond to advisors who are using you by calling with a thank you. Send them regular updates, monthly fact sheets, and white papers. Remember the rule of thumb: it takes seven times more effort to get new client than retain an old one.

The market crash of 2008 was a good cathartic event. FAs and investors are questioning their assumptions and as a result, may be quite open to new ideas. As a result, managers with alternative strategies are of great interest. But many traditional managers disappointed, so this is also a great time to get out there and tell your story as well.

Bottom line, get out there yourself, hire internally or engage third party wholesalers to let FAs know, face to face, who you are, how what you do is different, and more important than ever these days, how you manage risk.