Financial Services Pulse | Money Matters

Posted on: February 1st, 2024 by Morgan Arnold

Welcome to Money Matters, part of The MHP Financial Services Pulse. Our team of experts bring you their take on all things money and the communications considerations that the hottest trending topics in the space are creating. 

Are star fund managers a dying breed? 

Recent press coverage would point to the demise of the star fund manager.

Consistent redemptions seen by Terry Smith and Nick Train over the past year have been in focus, while the recently announced departure of Ben Whitmore from Jupiter sent the firm’s share price into a spiral. Meanwhile, Bobby Jain’s attempts to have the largest ever hedge fund debut seems set to fail, with expectations now being managed down. Looking further back in time, the retirement of James Anderson dominated the business pages. The less said of the fall of Neil Woodford, the better.

At the same time, we are seeing the rise and rise of passive investing. In the US, the amount of money in passive funds has for the first time outstripped that in actively managed counterparts – an eye-watering $13.3trn. How much of this is the pull to passive vehicles or more generous interest rates – and how much of this is a push from seemingly underperforming actively managed funds remains to be seen.

But the underlying debate between stockpicking versus following the market is not new. Nor indeed is the question around the value of the superstar stockpickers and their pulling power. The same questions could have been asked 10 years ago. And they were. For instance, the Financial Times questioned in March 2014 whether star fund managers are a dying breed. Since we still have well-known, highly respected names in the industry that seem to shine brighter than others and inspire client loyalty whatever the investment weather, the answer remains no.

That’s not to say nothing has changed, especially since the Woodford debacle. Larger fund houses are clearly more alive to the downsides of star managers – whether the key man risk, the perception of a lack of appropriate controls, or client concerns around long-term succession planning. That’s why they are far more disposed to communicating the infrastructure, processes and technologies that sit behind their portfolio managers and the collegiate teams that drive performance. Process over individual personality has become more common, through necessity; performance doesn’t just rest on one individual’s shoulders.

Investment personalities in The Networked Age

But of course that’s just part of the story. Star fund managers are a distribution team’s dream: they generate their own brand awareness, media interest, and ultimately inflows. As such, they will by necessity remain a core part of fund management’s marketing machine.

And in The Networked Age – the volatile, activist and polarised landscape we communicate in – there is a simple lesson that continues to help star managers cut through: the messenger is as important as the message. Essentially people connect with people they identify with or are inspired by.

We believe passions spread ideas. And through big personalities passionately demonstrating their conviction in their investment approach, they become highly effective – and often highly trusted – messengers.

Despite the advent of AI, and the rise of passives, investment involves humans, and therefore cannot be emotionless. This means there will always be a role for mavericks that we place our trust in – hoping we have found the next genius that can beat the market.

Diversify your spokesperson portfolio

Star managers deliver investment companies huge media profile. But the key lesson for communications teams is this: do not place all of your eggs in one basket. Managers do not stay in situ for ever. This means thinking beyond pure succession planning for a single manager; it means demonstrating the expertise and range of personalities across your portfolio managers. It is far better to build a small team of Galacticos than rely on one star player.

You can read all of our Financial Services Pulse content here. For more information about the Financial Services team or to discuss this topic further, contact Dan directly at [email protected].

Necessity or marketing gimmick: should investment companies shun ISA season?

Posted on: March 24th, 2023 by Morgan Arnold

A fixture in the calendar for most personal finance journalists, PRs and marketing teams, from February to April announcements of new offers, discounted rates and sign-up bonuses hit consumers’ inboxes on almost a daily basis, alongside the well-worn warning to use your annual ISA allowance while you can.

But is it really an opportunity for investment firms to reach a rapt audience with their propositions? Or is it a waste of time, requiring huge resources to cut through in arguably the most competitive period each year for share of voice? Or is the truth somewhere in the middle?

Lies, damned lies, and statistics

Whether or not ISA season is a success for investment companies depends on how you look at the data, and how much you read into it. Last year, the Investment Association heralded ISA savers pouring a net £934m into retail funds in the 2022 season, against a backdrop of record outflows in Q1 in total. Positive on the face of it. Yet this was half the level seen in 2021. And in 2019 and 2020, net inflows in the period did not top £200m. And yet, even if the evidence suggests ISA season does produce a bounce, is that “new money”, or simply saving that is being pulled forward?

The theory behind ISA season is fairly straightforward. The deadline of the end of the tax year, combined with the limit investors can place in an ISA in a given tax year, presents a natural impetus for investor action – and an opportunity for awareness-building campaigns from firms looking to target investors when they are most likely to invest.

Whether that theory stands up in practice is again debatable. Perhaps for high-net-worth individuals.  But with ISA limits now standing at £20,000 a year and inflation taking its toll on disposable income, mass market savers are far less likely to be concerned about using their full allowance. And for investors, chucking in a large lump sum at the end of a tax year means they don’t benefit from pound cost averaging – a key way to navigate market volatility.

What does this mean for ISA season comms strategies?

From a media perspective, ISA season is again a dual-edged sword. On one hand, the concerted focus in personal finance sections and dedicated sections in nationals and consumer titles, supported by an advertising peak, means there are more opportunities to discuss your platform, trusts or funds in the run up to the tax deadline. But the competition is at its toughest.

You will have to work harder to cut through the noise, either through exceptionally creative campaigning and/or more investing heavily to grow your share of voice as others do the same. But if you have not built trust in your brand in the rest of the year, or consistently engaged with media to build positive relationships, you are already at a disadvantage, and your return on investment in the period will be lower.

So, is ISA season dead? Not quite. Should investment companies shun it? Possibly. It depends on the firm, the wealth of customer they are seeking to acquire, the resource it has at its disposal for the year ahead, and its broader marketing priorities. But one thing is clear: ISA season should not be the be-all and end-all of the annual marketing plan. As investment companies know all too well, it does not do to put all of your eggs in one basket.