Why should investors and advisers give you their email address?

Why should investors and advisers give you their email address?

Eddy Wymeersch, chairman of the Committee of European Securities Regulators (CESR), is quoted in yesterday’s FT Ignites Europe as saying that many of the websites currently on offer from asset managers fail to provide investors with adequate detail on funds and investments. While I broadly agree with this assessment (there is always room for improvement), I’m not sure I agree with his solution to this issue: That a database of ALL investors should be maintained by each fund group so they can be notified by email of any relevant issues.

I foresee many issues with this line of reasoning:

1. From a purely practical perspective

  • Many fund groups today have no idea who the end investor might be. While this sounds odd Mr Wymeersch acknowledges this issue in passing and I assume he is referring to the now substantial holdings built up by Fund Supermarkets such as CoFunds and Fidelity’s FundsNetwork amongst the myriad others that now exist throughout Europe and indeed the global funds landscape. These services were established to provide investors with ease of administration and access to many fund providers via a single portal. On this basis they have been a resounding success. The problem from a fund manager perspective is that the fund supermarket maintains their own register of investors aggregating and reconciling all transactions on a daily basis.  The fund group is therefore unaware of who the end investor is. This issue of ‘disintermediation’ or lack of contact with the end investor or adviser was flagged as a potential issue during the early days of fund supermarkets and remains a hot topic even today.
  • Many investors hold their investments via nominee services on behalf of their pensions etc – again fund groups do not know who the end investors are.
  • How are fund groups supposed to capture this information. It would be very difficult to make investors provide an email address – not everyone will have one and those that do will change over time.

2. From an execution perspective

  • Keeping investors up to date via email is incredibly impractical if you consider the amount of information they need to send to an investor in relation to a variation in the terms and conditions of a fund. From experience I know that these documents are often very lengthy and incredibly technical in nature; in fact they often require an accompanying guide to explain what they mean. They are also very boring to read through and only extremely ‘hardcore’ investors even bother reviewing them.  These latter points mean that any email sent to an investor around this particular topic is unlikely to prove very successful from an engagement perspective. In fact sending mailings to investors along these lines at all may, over the longer term actually decrease the likelihood of investors opening and reading the communications – not a goal managers want to achieve.
  • At very basic level, fund groups may be excellent investment managers – just not the best digital marketers, particularly when it comes to email marketing.

The Solution

As I have commented in the past, fund groups need to focus not only on the material that they are producing but also how they can communicate the message most effectively to prospective and existing end investors. Managers should be prepared to consider:

  • Social media including blogs and forums – how many investor services teams toil away at addressing inbound questions about a managers funds time and time again. Would it not make sense to build an online database of questions and related answers for investors to search through. This approach is common in many other verticals – e.g. check out the TomTom support area.
  • Short and snappy but highly targeted email communications – message should only be sent if relevant to the recipient. This approach should be highlighted to potential subscribers to encourage them to register for updates. Only by offering something of value will investors subscribe for updates.
  • Online video – ‘push’ mediums can be more effective than ‘pull’ at getting your message across

Crucially, managers need to tap into their most significant competitive advantage – the fact that as the manager of the product in question they know the product best – a differentiator no-one can possibly compete with them on. By providing quality information about the funds that they manage investors and advisers will subscribe to manager lists – a byproduct of a successful communications strategy.

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