Sea Change in Shareholder Communication

by Kathryn Morrison

There is a sea change occurring in how mutual funds communicate with their investors. Communicating with shareholders now will be vastly different from what it was even in 2001. An estimated 70% of fund shareholders are regularly on line. Shareholder computers have the capacity to download audio and video... to say nothing of the ipod which can record information for your afternoon run. Fund companies are now wrestling with the most effective way to use their web sites to talk with their investors.

This new communication capability contrasts sharply with historical shareholder communication where once a quarter the managers thoughts had to be written, passed through teams of compliance officials, wrapped with graphics and data, printed and snail mailed to shareholders.

The SEC historically has put a premium on exactness.

A new premium needs to be added for timeliness.

Funds, and their compliance officers, whether internal or external, are not geared to turn around fund or market commentary in a timely fashion. Currently at many funds compliance approval can take a week. And once material is approved, the fund company is dealing with network people who need to post material quickly and who are not now prepared to do this quickly.

Should we be entering a bear market, communications can be different and more important than in a bull market.

In a bear market, the emphasis will shift to retaining existing customers as opposed to acquiring new customers.

Talking to customers is a good way to keep them.

There are now so many new tools for talking with customers whether in a volatile or bear market. There will be multiple use of information captured from a manager.

Current tools/techniques:

Conference calls with advisors and brokers (The platforms have gotten better at helping no-load funds do this, but it still takes about 3 weeks.)

Transcribing these calls for use on the website for use by individual investors.

Editing and shortening advisor conference calls into pod casts for individual investors.

Writing new commentary.

Linking to appearances on television or otherwise incorporating TV appearances into the web site.

Marketing folks at the fund companies are sorting through the barriers to timely communication and I think in 90 days we may see a great deal more fund and market commentary than we have today.