Tuesday, December 4, 2012

Meeting the Professionals Who Feed Off Your Fees: The Marketers

Meeting the Professionals Who Feed Off Your Fees: The Marketers

We are all familiar with the exalted portfolio manager and his minion of research analysts.  I thought it might be helpful to describe some of the other characters who make an investment shop function.

There’s nothing for the investment firm to manage without assets, so an investment advisor has to be able to hunt down assets.  I’m not talking about a startup, where portfolio managers and founders have to market.  This post is about an established firm.  Sitting only slightly beneath the high altar of investment professionals are the marketers, led by a chief or senior marketing officer.  These are the folks that hold the highest priority status on multiple airline carriers and get the best rooms at international hotel chains.  When you see somebody at the airport being given VIP treatment, and you don’t recognize him as a celebrity, it’s probably a marketing executive for a money management firm or an investment banker. 

Bank Warrants (2009)

The marketer’s job is to cultivate prospects, arrange meetings, and drive the long process of getting a potential investor from vague interest to a successful conclusion.  He is expected to have more than a passing knowledge of the firm’s products and a thorough understanding of the prospective clients likes and dislikes.  We’re not just talking about investments.  He has to know their tastes in wine, food, and entertainment (from PG to X-rated) as well as the detailed biographies on each of the prospect’s children.  In 2002, while evaluating a hedge fund of funds manager for the State of North Carolina, I asked a senior marketer to take me on a hike in the foothills outside Seattle before our dinner with his investment partners.  Not to be outdone, my staff made another marketer play basketball with them.  Marketers are always impeccably dressed, do not wrinkle, and never sweat on hikes or during pick-up basketball games. 

Although white males still dominate the top marketing positions in most firms, women and minorities are strategically placed with key client groups.  For example, in the public funds arena, the marketing contact is very often African-American or female because the money manager is trying to convince the decision-makers that he values diversity.  I’m not at all suggesting that these folks aren’t fully qualified, but the guys who run money management firms know how to project the image that helps secure the business. 

Marketers often clamor for exalted titles, such as Managing Director or Senior VP in order to inflate the power of their business card.  The marketer figures he has a much better chance of setting up a meeting if it appears that he’s a senior “something”, rather than a run of the mill vice president or associate.  In my experience, the marketer often say something like this in order to get his title: “Personally, I really don’t care about titles, but I need a really good one to impress prospects and clients.”

However, when the bonus isn’t big enough (and it seldom is), the title suddenly takes on a life of its own.  All too many times in my experience, the marketer’s year-end rant sounded a bit like this: “I am a [expletive deleted] senior vice president of this firm; an [same expletive deleted] officer of the [same expletive deleted] company, and you treat me like a piece of [different expletive deleted].”

These year-end meetings were a nightmare because every good marketer, despite his natty attire, treated potential accounts like a dog treats fire hydrants.  He made sure that during the course of the year he had left his mark on every piece of potential business.  In a firm of any size, I’d have the same conversation over and over about the same accounts, as each marketer had been instrumental in bringing in the business.

Despite their manifest social skills and past successes, marketers are no better than the track records they’re hawking.  If a money manager has had a hot hand, even a mediocre marketer is going to land business (and begin to think he’s a great marketer).  As momentum builds, the marketer wants to be paid more and more, even though he’s doing virtually nothing to bring in the business.  Conversely, when the performance is average, or even worse, the best marketer isn’t going to bring in any new business.  Fortunately for him, he’s probably still getting commissions from old business or enjoying a guaranteed bonus.  When the guarantees expire, you can expect that marketer will have business cards from a new firm.               

In most organizations, the good marketer, having reeled in the client, will want to move on to the next opportunity.  As a result, someone else is going to have to service the client.  If the firm is big enough, it isn’t going to be the portfolio manager.  Tomorrow we’ll enter the world of the client service officer.  He’s the Rodney Dangerfield of money management because he can’t get no respect.

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