Mutual fund companies have drastically cut back advertising
spending this year and many are tinkering with their marketing
approaches as volatile markets have sent investors scurrying.
Fund industry advertising year-to-date through the end of
August is down 58% vs. 2001, to $90.1 million, according to
Competitrack, a New York firm that tracks advertising spending.
Last year the same group of companies spent $215 million
through the end of August, which is the most up-to-date data
available from Competitrack.
This year, Franklin Templeton Investments leads the pack
in spending, followed by Vanguard Group, Oppenheimer Funds
Inc., T. Rowe Price, American Century Investment Management
Inc., The Nasdaq Stock Market Inc. and Fidelity Investments,
according to Competitrack. The Nasdaq Stock Market is represented
due to its advertising spending for its Nasdaq-100 Index tracking
While Competitrack ranks the companies by spending, it does
not disclose amounts.
Last year, Janus led the pack, followed by Fidelity, Franklin
Templeton, Charles Schwab Corp. (SCH), Oppenheimer, American
Century and Invesco Funds Group.
The primary reason for the cutbacks are that investor outflows
have crimped fund companies budgets, causing them to reduce
advertising spending, said industry watchers.
Advertising is one of the easiest areas to reduce when management
calls for expense cutbacks, said Geoff Bobroff, a fund industry
consultant with Bobroff Consulting Inc., in East Greenwich,
But Bobroff said that's a double-edged sword, because investors
are now so disaffected with fund investing and the stock market
in general that it will be a hard sell to get them back when
the markets and funds return to relative normality.
Also impeding ad spending is the uncertainty on the part
of advertisers who are pondering how best to reach investors
in a period when their confidence has been squashed by several
years of fund losses and a series of major corporate bankruptcies
Melanie Szlucha, a senior account manager for Competitrack,
said that prior to 2000, most fund firms' advertising focused
on the performance of their funds, which was spectacular in
the late 1990s.
But now, "they can't advertise stability because everybody's
getting hit," she said. "I think some firms are
hesitant because they don't know what to advertise,"
she said, of the reduction in advertising spending.
, a financial planner,
lawyer and professor at Northwestern University School of
Law, said he thinks some of the spending cutbacks are a result
of fund companies shifting their emphasis to third-party sales
from direct sales over the past few years.
The growing emphasis on adviser-sold funds "is a sea
change" in how financial products are sold and that naturally
affects the target of fund firms ads and the media they use
to reach the investment adviser community, he said.
Using Different Approaches
Individual fund firms appear to be heading in different directions
when it comes to advertising.
For example, The Lord Abbett family of funds, has stepped
up its advertising efforts and is launching a new campaign
early this month, while Janus Capital Management LLC, which
has suffered significant fund outflows over the past two years
and last year was the leader in advertising spending, has
cut back in all areas.
But Oppenheimer is staying true to its long-running approach
Lord Abbett is increasing spending and is launching a new
advertising campaign Oct. 6, said Doug Sieg, director of marketing
for the Jersey City, N.J., company.
Rapid asset growth has helped expand its advertising budget
as the firm has increased assets under management to $45 billion
at Aug. 31, from about $15.5 billion in 1996, he said.
The firm, which distributes its products through financial
intermediaries such as financial advisers, will try to reassure
investment advisers and their clients by the emphasizing company's
longevity and reliability in the new ads.
"While the markets have dipped and swelled over the
years, Lord Abbett has relied on disciplined investing to
consistently provide its clients with the best results in
the long-term," says the ad.
Janus spokeswoman Shelley Peterson, said the company has
been cutting back on advertising for the past few years, particularly
TV advertising, in favor of direct mail communications to
"It hasn't been an overnight change. It's been gradual
as the downturn continues and market volatility increased,"
she said. "It's quite simply a matter of (the company)
wanting to best use our resources and direct them so they
can be right in front of our shareholders."
The company is relying on its semi-annual Janus Report, to
address many investor concerns, said Peterson.
Oppenheimer, consistently one of the biggest spenders on
advertising over the past few years, according to Competitrack,
is not changing its advertising premise.
It has cut back on advertising spending relatively in tandem
with the rest of the industry, but it will continue to be
among the top spenders and maintain its advertising theme,
said Bruce Dunbar, vice president of brand marketing at the
The focus of its advertising is "to build credibility
and establish our areas of expertise in terms of management
capabilities," he said.
"Our advertising efforts are pretty much all geared
to building brand awareness over the long term," and
since it is not a direct retail seller that means trying to
appeal to financial advisers who sell its products, he said.