For most investment managers who practice active portfolio management, market volatility offers significant opportunity.
After all, if you think you have a good handle on what a company’s stock is worth, both excessive exuberance or unwarranted pessimism offer a great chance to buy on the cheap or sell on the high.
But it’s not just the portfolio managers who can capitalize on volatility: sales and marketing directors can do so as well.
When roiling markets are pounding on a portfolio’s performance, it makes the sales and investment management marketing process more difficult than normal.
For example, if a churning market has cut a portfolio’s value by 20%, with no clear signal as to where things may settle, it is natural for a marketing and sales team to:
- Keep their heads down
- Wait for the bottom
- Evaluate the damage
- Formulate a message explaining what’s happened
But in the interim, there is an “information vacuum;” a period during which questions are going unanswered and clients are being under-serviced.
Because the incumbent manager is temporarily capitulating to the market’s instability.
So while your competitors’ sales and marketing teams are hiding, an aggressive investment management marketing and sales strategy can take advantage of the fact your competition has temporarily ceded the field.
A matter of necessity
When markets are taking, and dragging the value of a portfolio's underlying securities (and thus AUM-based management fees) along with them, firms are losing important revenue.
Does it really make sense to simply sit around and wait for the market to rebound and help restore the lost assets? Such passivity in the face of turmoil is wholly unnecessary.
It is equally short-sighted to cut overhead by laying off the marketing and sales team (unless you are planning to outsource the work to a digital marketing firm such as ours, or a third party marketing firm).
If your business is struggling, that is precisely the time to redouble your efforts - not retrench.
Let’s say you’re a master limited partnership. Significant volatility in the fossil fuel industries, particularly the oil industry, has cut 60% of the value from your product. That’s a 60% reduction in your firm's revenues... and that’s before one single client capitulates.
How you respond says a lot about you and your firm’s approach to its business.
Sharks or jellyfish?
Irrespective of what you claim to be the long term goals for your business, how you respond, IN PRACTICE, to volatile markets says a lot about the true nature of the firm: are you a shark or a jellyfish?
Sharks… well, that analogy needs little explanation, other than to say the "sharks" are always trolling, actively seeking out and trying to capitalize on every possible market opportunity... including the weakness of their competitors.
If you are a jellyfish, your business is basically dictated by the vagaries of the market; drifting along, hoping to acquire whatever clients happen to become ensnared by your largely passive marketing “tentacles.”
So, when the going gets tough, is your impulse to sit tight and wait an indeterminate amount of time for your absolute AUM to rebound, or go hard after your competitors’ clients to make up for your lost revenue?
The reality is that it’s not easier to gain market share during favorable markets.
The most opportune times for market share battles are when extreme conditions cause complacency by your competitors’ sales and marketing teams.
When your competitors are unsure of how to react to uncertainty, be aggressive. Take advantage of their weakness. Capitalize on client frustration. Demonstrate your firm's differentiation when it matters the most.
You never know when the worm's going to turn.