Institutional money managers are putting their money on keeping existing clients while paring marketing budgets, a new survey shows.
The Association of Investment Management Sales Executives' Status of the Industry Survey found 29% of respondents had made cuts to client services, while 51% said their firms had cut the marketing budget.
J. Kurt Wood, partner at JRW Partners, Orlando, Fla., and head of AIMSE's communications committee, said most firms are doing all they can to keep clients happy. But that is coming at the expense of other areas such as asset gathering because of limited budgets after three years of down markets.
Conference attendance took the biggest budget hit; 46% of respondents said they have cut back in that area. Entertainment was axed by 35%; travel, 29%.
Other areas that have suffered cuts include: consultant associated institutes, 23%; non-salaried perks, 21%; and marketing materials (brochures, branding, advertising), 19%.
Less than 3% of respondents reported any personnel cutbacks in the marketing departments.
"You have to use the dollars that you have to spend most efficiently," said AIMSE member John Larson, managing director at Gardner Lewis Asset Management, Chadds Ford, Pa.
Kevin Rochford, managing director, global sales and client service at Northern Trust Global Investments Inc., Chicago, said his firm hasn't cut back travel or conferences, but "we have to watch dollars carefully ... look for ways to spend money smarter; where is the biggest bang for our buck."
Northern's marketers are spending more time on the large end of the pension spectrum, marketing the company's indexing business, which was bolstered significantly with its acquisition of Deutsche Asset Management's passively managed business earlier this year. "You have to make a choice, where is the biggest impact for our business and our shareholders," Mr. Rochford said.
Marketing professionals say that while it might make sense intuitively to scale back on marketing during downturns, that might not be the best strategy.
Dan Sondhelm, partner with SunStar Inc., an Alexandria, Va.-based marketing firm for the financial services industry, said it's better to be more aggressive during bad times because there's more "money in motion." Plan sponsors are fed up with performance, and firms that are out there telling their story "will be on more radar screens," he said.
Also, there's less competition because other firms are laying low. "In terms of building a brand, it's a great time for second- and third-tier firms to establish themselves," Mr. Sondhelm said.
Some firms have increased their marketing budgets, including Diversified Investment Advisors, Purchase, N.Y., and New York Life Investment Management, Norwood, Mass.
Aggressive in tough times
"We are the most aggressive when times are tough," said Joseph Masterson, senior vice president at Diversified. "It's the only time you can grab back market share," he said. "When everyone is spending, it's tougher to gain market share." Mr. Masterson said the marketing budget increased by 20% across the board in 2002, and the firm experienced a 35% increase in net new business in 2002.
Thomas Clough, managing director at NYLIM, said his firm made a conscious decision early last year to increase its marketing budget to gain market share. In 2002, NYLIM institutional assets climbed 11% to $111 billion, according to Pensions & Investments' Money Manager Survey. NYLIM increased is institutional sales and marketing budget by 25% in 2002, he said.
Overall, the AIMSE survey found that most respondents believe their firm's investment performance was either in line with, or outperformed, the benchmarks. Thirty-eight percent said they outperformed in 2002, while 35% said investment performance was in line. Just 20% said they underperformed.
Over the past three years, 56% said they have outperformed; 21% said they are in line; and just 17% said they underperformed. "Marketers always see the glass as half full," said Mr. Wood.