Investment management firms cannot count on their performance numbers to grow their business.
They must employ a professional marketing strategy, including both a traditional relationship-based approach, as well as Inbound Marketing.
Solid performance is preferable (obviously), but it’s not a requirement for managing a successful investment management firm.
Why AUM Growth Lags Performance
In an earlier post on investment management marketing vs. sales, I wrote,
[C]an you easily name a larger, more successful competitors with worse performance numbers? I’d imagine most... would answer in the affirmative.
So, if your numbers are better, but AUM is worse, it stands to reason that your more successful peers are doing something you aren’t….[and] I’d say that successful investment managers have:
- Distinct sales & marketing strategies that are more thoughtful, organized, and aggressive;
- Sales and marketing teams in alignment with each other;
- A budget commensurate with the importance sales and marketing holds in the firm’s hierarchy of importance.
If we’re being completely honest, most efforts lag because of #3.
Bringing in top-notch personnel, improving efficiency and performance, and making expenditures on other sundry department initiatives all tend to favor the investment team over the marketing team...and each department's budget typically reflects these priorities.
It's a tacit admission that many portfolio managers, deep down, don’t think that sales & marketing are as important as portfolio management.
But here's the thing: when managers look at the firm’s performance numbers, and they don’t think AUM reflects their efforts, it’s for this very reason.
Shortchanging the investment management marketing & sales budget is a short-sighted business decision because a business isn’t a business unless it markets and sells its goods and services.
A Counter-Intuitive Strategy
Compared to what is spent on portfolio management and the investing side of the business, many investment management firms provide their marketing and sales teams a budget that's often downright parsimonious.
Sure, the sales & marketing budget might get a boost every now and then, but whenever the market pulls back and a firm loses a few clients, marketing & sales is more often than not the first department to see its budget cut.
It is a counterintuitive strategy: Cut the marketing budget at the precise time the firm needs to more aggressively market itself.
Reorienting a Firm’s Priorities
Marketing has to become a much higher priority for investment management firms of all stripes. The industry is only getting more crowded and competitive.
The firms willing to adopt and adequately fund a professional investment management marketing effort will prosper. Those that don’t will flounder.
At the end of the day, we need to uncouple the marketing budget from the year-in and year-out swings in AUM individual firms can experience.
The best way to do so is to ensure that investment management marketing is able to implement a long-term strategy with clear ROI, and numerous non revenue-bearing metrics that help to measure the success of the effort.
I’m talking about Inbound Marketing. Want to learn more?