Fund companies bet on new advertising strategies

(September 16, 2005) It’s no wonder the mutual funds offered by banks are attractive to clients — the banks and a select few mutual fund companies are the only entities trying to reach consumers directly these days. Recent announcements from Fidelity and Dynamic Mutual Funds, however, could signal the beginning of a new cycle that will see companies reaching out to clients and taking a renewed interest in their public marketing initiatives.

The news could be seen as a welcome change. Mutual fund advertising directed at clients has dried up in the past several years as companies instead focus on delivering their message straight to advisors — another cost downloaded to the advisory network, in a way, only in this case the cost is the time and work needed to familiarize clients with the different products available in the industry.

“Last year, and in the last few years, mutual fund advertising has been remarkably dull overall,” says Bob Scot, president of Ascot Marketing and publisher of The Mutual Funds Advertising Performance Report. “Consumers have really yawned at a lot of it.”

He says advertising touting fund performance has declined in recent years and managed portfolio advertising is somewhat widespread, but the most notable trends in the industry include the rise of bank advertising and the relative invisibility of broker dealer companies.

In 2000, there were between 28 and 30 companies advertising to reach clients. Today there are no more than 16. In terms of advertising effectiveness, Scott says client awareness is plummeting as well. Between 2000 and 2005, consumer awareness of banking advertisements has risen to roughly 69%, up from 32% in 2000. Awareness of broker dealer campaigns on the other hand, has dropped from 41% to 18% during that time period.

“The banks have kept the pressure on and we’ve seen companies like Templeton, CI, and AGF as of this year, basically retiring from advertising. The banks are just getting stronger and stronger in this field,” says Scott. Companies who’ve pulled away from consumer advertising, meanwhile, have been focusing most of their efforts on targeting financial advisors. “That is now a very crowded situation, with everybody yelling for attention there.”

However, with Fidelity’s new Paul McCartney ad campaign, entitled “This is Paul” and Dynamic replacing its familiar rowing theme with an ad campaign featuring Mike Weir’s caddy, Brennan Little, other companies might soon be pressured into rethinking their campaigns of anonymity.

“It’ll be interesting to see. It’s really a new direction for the industry,” says Scott.

Companies interested in exploring this new direction could look to an old AGF campaign for inspiration. The superhero campaign at AGF that saw popular characters in retirement, like Spiderman stuck in a sand trap and the Incredible Hulk reading anger management books on the beach, was the first and most successful case of an industry company borrowing interest in this way.

“That was, and remains the most effective piece of advertising that’s ever run in the industry, both in terms of awareness and attitudes to the advertising. It borrowed the established personality of Spiderman and adapted it to AGF’s needs,” says Scott. “Now again we’re seeing borrowed interested through established personalities. It could be interesting to see. Borrowed interest automatically sets you at a certain level in terms of awareness. I think it should work well in both cases, assuming that they spend a reasonable amount of money.”

If industry sales continue to stay strong, Scott says he expects spending in this area will pick up in 2006. “We’ve really seen it decline for the last five or six years. I think now we’re at the bottom. Fund sales are strong — that’s obviously going to help from a budget point of view. I’m expecting we’re going to see a definite upturn in spending next year for the first time in at least five years,” he says. “Regardless of whether or not sales are strong, the banks are going to continue their pressure, no question about it. I think it’s now for the independent broker dealer companies to sit back and rethink their strategies.”

Filed by Kate McCaffery Advisor.ca, kate.mccaffery@advisor.rogers.com