Three Outcomes from the Investment Vehicle Convergence Trend

Tallying quantities of topic mentions in daily financial news feeds can reflect what’s on the minds of investors and industry professionals.

  • Exhibit A: regular coverage of the Department of Labor’s fiduciary rule.
  • Exhibit B: regular coverage of robo-advisors.
  • Exhibit C supports the theory in reverse: little news and, likely, little mindshare, though it deserves more attention. There is a fundamental change taking place in the way investment products are assessed, which is evolving the product ecosystem as well as how financial services market research firms explore those products.

An example of the change is BlackRock’s recent announcement that it will be rebranding its index mutual funds as “iShares” (in effect later in June). This news broke at about the same time that BlackRock announced the firing of several portfolio managers in favor of algorithms and models, but it appeared to get only a fraction of the attention. Past product development market research has been based on a validated assumption that the product decision-making journey, greatly simplified, has four steps:

  1. Identify the exposure you need
  2. Determine whether you want to pursue it actively or passively
  3. Select the vehicle (mutual fund, ETF, etc.)
  4. Select the specific product

By lumping together ETFs and index mutual funds, rebranding them all under the iShares name, BlackRock is blurring the vehicle distinction and introducing a journey that may skip the vehicle selection step altogether.

Contributing to the convergence is the actual blurring of the vehicles themselves. Take, for example, exchange-traded managed funds. These sit so firmly between ETFs and mutual funds that one provider uses 1,617 words on its website to describe the differences. Our product decision-making research often purposefully speeds through steps one through three, focusing on the selection of the product within the context of the vehicle. For example, “What are the most important factors that drive the choice of an ETF once you’ve settled on the fact that you want a passive ETF for a given exposure?” Removing that vehicle context could complicate the choice – now you’re picking among a larger and more varied product pool. However, this is surely not BlackRock’s intent, which leaves another option: BlackRock is placing a bet that its iShares brand can carry more weight and simplify the choice beyond where it is today.

A tour of top asset managers’ websites shows a range of approaches to product navigation, each undoubtedly hoping to direct interested parties to the right product quickly. As asset managers continue to use brand market research to pursue this goal, be on the lookout for three potential outcomes:

  1. Reduced visibility of the vehicle type as a key component of the product. Related decrease in the importance of educating about vehicle types.
  2. Simplified product decision-making journey.
  3. Elevated importance of brands and product naming structures to facilitate that simplified journey.

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This entry was posted in Brand and Messaging, Financial Services, Product Development by Lindsey Dickman. Bookmark the permalink.
Lindsey Dickman

About Lindsey Dickman

Lindsey Dickman is a vice president in the Financial Services Research division of Market Strategies. She leads the Market Strategies custom wealth management sector and directs a diverse project portfolio that addresses all stages of the product, customer, brand, and message lifecycles. She has been partnering with clients in a research director role for 12+ years and has had an emphasis on wealth management for 8. Lindsey focuses on interpreting feedback and data to drive home the “so what” from research results, particularly to tie them to clients’ business needs and industry trends. She has a range of qualitative and quantitative experience but specializes in programmatic, multi-phase, global initiatives. Prior to joining Market Strategies, Lindsey was a senior research manager at The Link Group, where she led ad hoc and tracking research for technology and retail clients. She graduated with high honors from Emory University with a bachelor’s degree in economics and Spanish. Lindsey is trying to perfect her tennis drop shot and enjoys going for walks—or, more precisely, smells—with her beagle, George.

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