Distribution Tips for Small Fund Firms

By D. Bruce Johnston, President, DBJ Associates

Recently I asked Dan Sondhelm, Partner and Vice President, SunStar Strategic, what strategies will help top performing small funds get the attention and recognition they deserve from investors and advisors. For those of you not familiar with SunStar and their Fund Factor publication, they specializes in helping institutional investment managers and mutual fund firms attract investors, strengthen distribution and build brands through structured news generation programs and smart marketing.

DBJ:  Dan, can you name a few distribution misconceptions small mutual funds have?

Dan:   Yes Bruce and thanks for asking.  We have found that most small mutual funds struggle for assets in this competitive marketplace because of beliefs such as:

  • “I’m too small to get noticed.”
  • “I’m a separate account manager. Our fund is only for smaller accounts for our larger clients.”
  • “I don’t do marketing.”
  • “I can’t afford a wholesaler.”

Despite being hidden gems, smaller funds with these beliefs tend to stay small or eventually get out of the business.

The alternative is to commit to growing your fund. Then leverage the fund’s public track record to also grow your separate account business.

DBJ: Does acceptance onto a platform assure asset flows?

Dan: Just because you’ve been accepted on a platform doesn’t guarantee assets will follow. Successful distribution lies in ensuring those advisors know you, know your people and know your products. But not all firms can afford a wholesaler (or twelve) or the time on the road to work and support your financial advisors.

DBJ: What strategy can firms that can’t afford wholesalers employ together assets?

Dan: Virtual wholesaling can be an excellent way for smaller firms to develop stronger distribution to compete with the larger players. This alternative method to traditional wholesaling can also help larger firms scale back their spending while still getting results.

In general, virtual wholesaling requires fund sales professionals to use technology to communicate with advisors in a structured and timely way to attract and retain investors, while building brands.

DBJ: We hear a lot about the “Power of Story”.  How important is having a compelling story to distribution success?

Dan: Did you have a favorite book when you were a child – one that you could easily recite by heart? In order for advisors to really get to know you better,  you need to tell a solid story, consistently.

That story includes information about your corporate history and funds. It articulates your key themes, sector strategy and top stock selections. At its core is your investment process. Perhaps most importantly, it is a living story — one that grows and adapts as the markets twist and turn. It let’s investors know about the good decisions you’ve made and the current positioning of your fund. Once you’ve developed your story, keep it fresh and ensure that everyone in your firm can tell it without hesitation.

DBJ: How important is media coverage in a distribution strategy?

Dan: Admit it. You’re more likely to buy a specific brand of product if a professional or celebrity endorses it. The same goes for investment firms. Third-party endorsed news coverage in national and local business publications adds credibility that can’t be bought.

Positive, frequent media coverage can often be the silver bullet in your marketing effort. Earning such recognition on a regular basis attracts advisors and investors, strengthens distribution, and builds your brand at a fraction of the cost of most other marketing efforts. Consistently tell your story to top journalists in order to build relationships and earn continued press coverage.

DBJ: You mentioned virtual wholesaling earlier; does that mean a web presence is not important?

Dan: Your Web site is not just a place on the Internet where you cut-and-paste the text from your prospectus. Instead, it is a place for you to tell your story and keep your clients and prospects coming back. There are some simple ways to enhance your existing web site to ensure your content is fresh and rich.

  • Add a Press Room that features media reprints and other information so reporters can get the information they need quickly; Showcase your latest press coverage on your Home Page to add immediate authority.
  • Post and archive your market and portfolio commentary, quarterly at a minimum, monthly, weekly or daily as the market warrants; Post the latest commentary on your Home Page.
  • Integrate your fund site with your corporate site to provide timely information and minimize compliance/FINRA review delays.

Providing such information in easily accessible ways helps advisors and prospects learn more about you and how you think quickly and efficiently.

DBJ: How much is too much communication?

Dan: Regular communication with advisors is critical in order to keep your story top of mind. Consistently offering timely and meaningful information will position you in their minds as the expert on certain topics.

  • Host Webinars or conference calls for advisors on a quarterly basis.
  • Use monthly email newsletters to drive advisors to new content and fresh ideas on your Website such as recent commentaries, Webinar promotions and media coverage.
  • Take advantage of platform outreach programs to stay in front of their advisors; many of these are free.

A healthy relationship is based largely on open communication. Building strong relationships where advisors trust and respect your firm requires proactive communications.

Dan, terrific insights and ones that should be most appreciated by our readers.  Thanks.

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