As mutual fund wholesaler economics get squeezed, mutual fund CMOs find best new friend -- online advertising

Brooke’s Note: Ignites Research shares an owner, Financial Times, with Ignites, the online publication for mutual fund companies that sells some advertising (to supplement subscription fees) to them, hence you could say there might be a glancing conflict in providing this data. Ditto for RIABiz for covering the study, except with RIABiz we are almost soley dependent on revenues from online ads, including some placed by mutual fund companies. But the placement of Ignites and RIABiz in the food chain also gives them/us a front row seat on this shift. RIABiz advertising chief Frank Noto says these purported changes toward online dollars and consciousness at fund companies ring true on two levels. First, more people at mutual funds are reaching out directly to him — not from the marketing department but from the people whose job it is more holistically to reach RIAs. Second, when mutual fund companies run ads they are no longer content to ask us for our metrics. They put their own de facto LoJacks in their banners on our pages, called tags, and they watch the behavior of that banner visitor as they advance to a landing page, white paper etc. With any luck, this marketing trend will lead to funds and service being customized more effectively to the advisor, the investor and the fund company. Costs will come down and customization of product and service will go up.

After years of serving as a piggy bank for print publications and mutual fund supermarkets, the mutual fund industry is finding online advertising — as ephemeral as it appears — to be a decent ally.

In 2012, digital marketing initiatives composed just 24.4% of the average industry marketing budget, according to in a new study by Ignites, the specialized online publication for mutual funds owned under the same umbrella as Financial Times.

This year, digital marketing is up about 25% to 30.4% according to Ignites Distribution Research’s proprietary survey of fund managers.

This rate of growth is likely to continue in 2014. Marketing executives estimate that digital initiatives will comprise 35.4% of total marketing budgets, the study shows. See: How RIAs are forcing mutual fund wholesalers to lead or get out of the way.

Budgets steady but online spend spiking

This shift is occurring despite mutual fund providers’ retail marketing budgets holding steady in 2013 compared with 2012; and 57% of firms surveyed had flat marketing budgets in 2013 with just 21% of firms revealing double-digit budget increases. Nearly all of those companies upping spending were small firms, according to Ignites.

Jesse Mark: As marketing budgets get
scrutinized, mutual fund marketers need to
justify it. Online is very trackable

“Fund companies just had to worry about making it on an approved list at a few wirehouses or broker-dealers, it was sufficient to create traditional marketing [Fund fact sheets, sales ideas, etc.] and whatever specific collateral the national accounts needed. Some level of business was assumed, and it arrived. Marketing was a ride-along, not necessarily expected to drive or contribute to business. See: 10 fund wholesalers and executives offer views about how they seek to add value for RIAs.

Digital mark

“More firms are beginning to transition to a “digital first” mentality, where digital is integrated into the fabric of the marketing organization,” writes Jesse Mark, senior research analyst at Ignites Distribution Research in New York.

The divide has been a tough one to close. Advertising is inherently abstract enough. It gains something tangible by sitting on a printed page but advertisers are finding that online ads — just the manifestation of digital signals on a computer screen that not only disappear as the user jumps to a new window but also rotate and share space with competitors — may actually be a preferable, even highly effective, choice.

The shift is encouraging but really just brings mutual funds in line with the rest of the planet and its service and product providers, according to Pat Allen, principal of Rock the Boat Marketing of Chicago.

Based on the data — digital marketing as a percentage of all marketing— from Gartner (link below), I think it’s on track with other industries (average is 25%) and may be higher. For Gartner’s data on spending click here

The forces behind this immersion in an online world are legion, Allen adds in an email.

Marketers hijack IT, sales budgets

“What I do see that’s driving the spending: mobile, marketing automation and the demand for continuous content development that takes multiple forms that may require outside resources (video, design, interactive). By the way, 'marketing’, as a department, doesn’t take on 100% of the mobile and automation outlay. Most marketers find a way to get other business units (IT, Sales) to share the capital expense. I’m not sure how much of that is reported in the digital marketing budget data Ignites is reporting.”

Mark says that, indeed, advisors consistently spend more time living online and so that’s where advertisers need to be. But the other side of that is what’s going on with the mutual fund companies themselves — reeling still from 2008-2009 and the onslaught of low-cost ETFs and even higher-cost alternative investments.

“As marketing budgets get scrutinized, mutual fund marketers need to justify it. Online is very tractable,” Mark says.

This tractable nature of marketing data is the currency of a new breed of chief marketing officer at mutual fund companies that arrives with strict ideas of tracking return on investment — even as it pertains to advertising dollars. In addition to ROI, those Comes are preoccupied by using predictive modeling. They are also determined to have data flow across what have traditionally been silos of sales, marketing and operations. “You can actually connect these disparate services.”

Backward is now forward

Allen says in her email that it’s worth taking a step back to realize just how big a leap that this is for mutual funds.

“The predecessor of the “Digital first” cry was the “Web first” cry, which started years ago. Early on, the tendency was to make sure all the print was done and distributed and then update the Website! But your readers, those RIAs, are a whole 'nether cat. Wholesalers will work their top 250 or so and Marketing needs to work the rest. Fortunately, technology is available today (marketing automation, CRM integration with content systems, even predictive analytics at some of the leading firms) that make relevant communicating with many more, smaller firms and individuals possible. And, in a world where there’s no home office contact, measurement is important customer feedback, in addition to providing insight for fund company marketing management.” See: How RIAs can maximize their web marketing with nary a 'friend-in’ or tweet.

Mark says indeed it brings customer acquisition and servicing more elegantly under one roof.

“The move to digital signals that marketers are becoming progressively more adept at using technology to reach customers, but more importantly, to engage with customers online. Such digital engagement is a skill that direct fund providers have mastered, but it remains a struggle for many intermediary-distributed fund providers that historically relied on wholesaler interaction.”