Don’t Go Changing Self-directed Investors

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DIY Investors Live in a Constant State of Uncertainty and That’s OK

A client recently commented to me that self-directed investors are more challenging to serve. Representing only one-third of all affluent investors, these do-it-yourselfers neither work with traditional financial advisors nor use advice from other sources including distributors and asset managers. A look at investor sentiment during the market volatility in Q1 2018 sheds some light on key differences in the self-directed investor’s mindset compared with the traditionally advised (those currently working with a financial advisor).

Overall, affluent investors started 2018 with optimism and hope in the current investing environment. Yet concern about inflation and the impact of trade sanctions began in late January. Financial advisors, asset managers and distributors all dusted off and updated their market volatility messaging and outreach in anticipation of negative market action. Following February’s 10% correction in the S&P 500 Index and the VIX reaching a peak of 37 for only the second time in the past five years, investors ended the first quarter with far less optimism. In fact, the top-cited emotion in March was uncertainty along with a significant increase in fear. Continue reading

Four Things the SEC Can Teach Us About Messaging

In an historic town hall held this week in Atlanta, all five Commissioners from the Securities and Exchange Commission sat mere feet from the general public and spent more than the planned two hours educating through a mix of prepared content and Q&A. The same commitment to investor protection that leads to the SEC being well-known for regulation also drives its emphasis on teaching. Though our work at Market Strategies and that of our clients largely rests in the private for-profit sector, we all share the same goal of communicating so that the target audience will listen and understand. From that perspective, we can take away a number of lessons from the way the SEC’s message was delivered…

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Opportunity is Knocking—Are You Listening?

Opportunity Knocks—Are You Listening?Addressing Hidden Needs in a Mature Insurance Marketplace

A recent TechCrunch article spotlights Lemonade, an insurance upstart that is boldly reimagining the customer experience. The young firm has already made waves with its use of cloud technology and artificial intelligence to sell insurance, and now it is going a step further by crowdsourcing a full rewrite of its insurance policy from scratch, with the goal of devising documents that consumers can actually understand.

Lemonade has correctly identified a critical pain point for insurance consumers—the underlying product is begging for innovation. Traditional policy documents are inscrutable and full of legalese and were never written with customers in mind. The policy is a great place to start the insurance product revolution, but does Lemonade go far enough?
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Bridging the Gap: Exposing a Disconnect between Plan Providers and Plan Sponsors

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The defined contribution (DC) plan market is increasingly dynamic with a wide array of industry forces, priorities and innovations in play. In the wake of on-and-off industry reform and legislation along with a continual stream of fee-related litigation, DC plan sponsors are being courted with the latest solutions designed to propel participant engagement, foster financial wellness and, ultimately, increase participant retirement readiness. Yet many are still struggling with the perennial challenges of managing plan costs and navigating the myriad of fees associated with offering their employees a competitive 401(k) plan.

As the DC industry modernizes and becomes more efficient, the struggle with plan fees continues to hover over many organizations, exposing a disconnect between plan providers and plan sponsors. While Micro plans remain the most fee-sensitive segment, Small-Mid plan sponsors appear to be experiencing the most angst and are poised to take more definitive action this year, reporting an increase in likelihood of launching a formal 401(k) plan review or switching DC plan providers. In contrast, Large-Mega plans, which command higher rates of negotiating power, enjoy the freedom to think more holistically about participant needs and are better-positioned to harness the latest innovations.

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No Longer Optional: Using Social Media to Reach Ready-to-act Investors

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While social media use is the norm among affluent investors overall, recent findings reveal that ready-to-act (RTA) investors—those who plan to make a new investment in the next three months—are using social media at even higher levels. RTA investors report using at least 2.4 social media sites each month on average compared with an average of only 1.8 social sites for affluent investors who do not plan to make an investment decision in the near-term. More specifically, compared with all affluent investors, RTA investors over-index on visits to Facebook, YouTube, LinkedIn and Twitter. A social media presence is no longer optional but is quickly becoming a mandatory component of a distributor’s or product provider’s successful marketing plan and media buying strategy.

Looking at the four major social media platforms in more detail reveals two distinct use tiers:

  • Tier 1, Facebook and YouTube: Used by a majority of affluent investors, with each becoming a nearly ubiquitous presence across the RTA segments.
  • Tier 2, LinkedIn and Twitter: Draw dramatically higher use among RTA investors compared with the broader audience of all affluent investors. This highlights the potential value offered by these platforms in targeting an audience that is ready to make an investment decision

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Digital Marketing to Advisors: Maximizing Effectiveness to Boost Brand Engagement

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Advisor marketing is in a state of flux, evolving rapidly alongside all other types of mobile communication and efficiencies in terms of staying connected 24/7. At the same time, advisors are faced with increasing responsibilities and higher levels of scrutiny on how they service their customers. Asset managers are sensitive to that and seem to understand that constantly barraging these busy advisors with marketing isn’t the best way of capturing their attention or providing a solid ROI. In fact, last year, advisor-reported marketing monthly touches from financial services providers dropped in frequency, from 110 in 2016 to only 101 in 2017. With the number of marketing touches dwindling and capturing advisor attention not getting any easier, asset management firms are funneling more and more marketing dollars into digital campaigns. Is that the right move?

Is Digital Marketing the Right Tool?

The short answer? Yes.

In 2017, advisors cited email as the most effective way to communicate with them, even outranking external wholesaler visits. What’s more, after wholesalers, the digital touches of websites, webinars and mobile apps generate the greatest lift in brand consideration. Continue reading

Uncertain Optimism: Investors React to a “Too Good to Be True” Q4

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Investors React to a “Too Good to be True” Quarter

Measuring Investor Sentiment During a Period of Unprecedented Growth

My father-in-law had a saying, “If something is too good to be true, it is.” Yet the last quarter of 2017, which in many ways seemed unbelievable, really did occur. During this time, all-time stock market highs became commonplace and the US economy continued to pick up momentum. 637,000 jobs were added and the term “full employment” was quoted in the media with virtual champagne corks popping in the background. Consumer confidence reached a high not observed since the start of this century, and the CBOE Volatility Index, or VIX, hit an all-time low since its inception in 1993.

Throughout the fourth quarter of 2017, uncertainty levels dropped and investors became increasingly hopeful and optimistic. Confidence was highest in November while, despite political and social events, anxiety and fear remained largely at bay. As the new year approached, hope and optimism became the leading emotions expressed by investors toward the market. Continue reading

The Secrets of How, When and What in Institutional Marketing

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Many asset managers struggle with their client communication strategy in the institutional market. The sophisticated nature of this audience in terms of their investment knowledge and experience makes for a particularly tricky course for asset managers to navigate. Sending content that’s viewed as too simplistic or too frequent could be annoying and cause clients to ignore future outreach. Providing content that’s too rich or too infrequent runs the risk of the content becoming irrelevant. All the while, the needs and interests of pension investors are often quite different than those of endowments and foundations, requiring that content be tailored appropriately to each audience. Compounding the challenge further is the choice of medium—email or in-person? Digital or print? Our latest US Institutional Investor Brandscape report provides insights to help institutional marketers answer these questions.

How?

To pinpoint the optimal form(s) of contact, we asked institutional investors to identify the most effective means asset managers can use to communicate with them. Overall, email is the overwhelming favorite, selected by more than half of institutional investors. In-person visits are the preferred method of one-fifth of institutional investors. Continue reading

Loyalty Has Benefits On and Off the Field

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With Super Bowl LII behind us, the professional football season of 2017–2018 is over but a tremendous amount of loyalty remains among New England Patriots and Philadelphia Eagles fans. One doesn’t have to spend too long watching an NFL game to witness what loyal fans will do to cheer on their team in the pouring rain, sub-zero temperatures, or near-whiteout snowfall. The feeling of support and allegiance from fans for their teams is palpable.

What drives fan loyalty? The team, an individual player, the coach, the owner or various combinations of all of the above. Influence on loyalty from a combination of factors also holds true for investors working with advisors and other investment professionals and their respective firms. In fact, the industry average loyalty to an investment firm among advised investors is substantially higher than among the overall affluent investor population, indicating that the inclusion of a financial advisor or other type of investment professional offering advice is key to client loyalty, referrals and retention. Continue reading

Is ESG Investing Relevant in the Institutional Market?

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Environmental, social and governance (ESG) investing is continuing to impact the wealth management space. As individual investors become increasingly concerned with the ethics and environmental impact of the companies they are supporting, they are passing that concern on to the institutions that manage their investments. In fact, ProxyPulse*, a report by Broadridge and PwC, found a growing momentum of ESG proposals in proxy meetings in 2017. Following the US withdrawal from the Paris Climate Accord, the report also suggests an expected increase in questions from shareholders on environmental impact and climate change in 2018.

To keep a pulse on the growth in the ESG category, Cogent tracks interest in and usage of ESG investing among all the audiences we survey: financial advisors, DC plan sponsors, affluent investors and institutional investors. Specifically in the institutional market, we added a new question to this year’s US Institutional Investor Brandscape report, fielded late in 2017 and publishing this month. We asked institutional investors in the US how likely they were to adopt ESG investing in the next 12 months. We found that, while few institutions have already incorporated ESG in their portfolios, usage is considerably higher in the non-profit sector, where the approach to investing tends to be more mission-based than is typical among pensions. Continue reading