Why it's easier for emerging funds than iPad "wannabes" to compete

iPad vs Kindle Fire

For emerging fund firms, going up against massive brands such as Vanguard or Fidelity can feel similar to lesser known tablet manufacturers facing off against Apple today.

Apple's sales and marketing approach, phenomenal design, and deep pockets led to domination by its products. Every tablet competitor is held to iPad's standard of performance. Even those with differentiators such as two screens or lower costs are having a difficult time competing.

Many emerging fund companies don’t have sophisticated sales and marketing strategies and deep pockets like Fidelity or Vanguard. But there is a difference. They can often provide better returns and use more interesting investment strategies than bigger, more well-known companies. A portfolio manager may even pick up his or her own phone when a shareholder calls.

Build it and they will come? Not likely. But can competitive products and good stories level the playing field with the industry leaders? Absolutely!

There is an infrastructure in place that makes it more likely for funds of all sizes to get their share of the spotlight. Are you taking advantage of it?

1)    Inclusion in ratings services and their syndication networks: Morningstar and Lipper offer performance rankings regardless of a fund’s size. Then rankings are picked up in newspapers, magazines, and websites throughout the country. For example, The Wall Street Journal's “Category Kings” table shows the top-performing mutual funds in different styles – often, smaller firms make the lists. See our recent blog post on this topic.

2)    National availability: For a few more dollars in Blue Sky fees, emerging managers can have the same national reach as their larger competitors across all 50 states. A bit more effort puts your funds on the national supermarkets like Schwab, TD Ameritrade and Pershing. Remember, being on platforms doesn’t guarantee sales. It’s still up to you to be proactive and get your audiences interested.

3)    Free or low cost platform services: Key platforms offer services at no charge to funds to connect with their advisors. For example, Schwab can promote your Webinars to their advisors for free, if you have a Webinar and plan ahead.

4)    Endorsements from financial news media and bloggers: The financial media write about quality mutual funds. Reporters often interview portfolio managers to learn about their strategies and how they are positioning their portfolios. You may be surprised that reporters are interested in speaking with smaller shops if they have a good story to tell. Then you can use any coverage in your other sales and marketing efforts to add credibility.

Unlike the tablet market where managing a second tier brand would be a struggle in today’s environment, emerging fund firms can be competitive with industry leaders because so many emerging firms have a good story to tell.

By Dan Sondhelm, SVP & Partner, SunStar Strategic