People don’t believe in financial services; but do believe in endorsers…
When people think about influencers, they often think of individuals on social media, shamelessly hawking and flogging consumer products to their hapless followers on behalf of consumer brands. These influencers benefit from the direct engagement consumer facing brands require from their customers - and it’s rightly a gravy train for the most effective influencers.
As many as one in four of under 35s (the beneficiaries of generational transfers and soon to be guardians of capital) base the majority of their decisions on the recommendation of a third-party endorser. If the recent Nielsen report on global trust in endorsement is anything to go by – a weighted average of 15% of all working age people make all their decisions via this route.
It’s really no different in financial services, no matter how hard we try and claim exceptionalism to the status quo. Influencers, and influential platforms, have fast become the key guardians of financial decision-making.
Financial journalist Marina Gerner recently wrote a piece citing research that revealed investors in the main rely on three key sources regarding financial decision-making:
- Online sources of information for investing advice
- Family members and friends
- Third-party recommendations i.e. investment platform best buy lists
Endorsements are key. Consumer-facing businesses are very alive to it regarding their employment of high-profile social media personalities, referrers and comparison review websites. Likewise, the financial services sector, and the players within it, are ultimately beholden to the:
- Ratings platforms
- Fund supermarkets
- Investment platforms
- Best buy lists and wealth shortlists
- Family/friend/colleague referrals
- Their online go to sites (even if this includes the likes of Facebook, Reddit etc.)
There is certainly some correlation between highly endorsed funds, and AUM growth rates. Just looking at an example of the UK equity income space, shows that the most featured funds on best buy lists, Man GLG income (funds have swelled by $10 billion in the past five years), Threadneedle Equity Income and JO Hambro UK equity income are all riding high on AUM growth.
The more marketing spend that is steered towards promoting the platforms, individuals and channels that can make or break your brand, the better off the brand will be; the remainder of the marketing efforts will likely be futile relative to the opportunity cost for missing out on the endorsement route.
A particular fund supermarket took a lot of the flak for Neil Woodford’s ill-fated Woodford Income Fund being so successful - in many cases they took more flak than Woodford himself, because, rather frankly, customers, trusted and believed them more so than whether Neil Woodford was any good or not – his fund was merely the end product.
Food for thought.