David Haigh, chief executive of Brand Finance, discusses why some firms might be missing a trick in not making more of their performance when trying to stand out from the crowd.

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n an increasingly crowded and competitive landscape, the perennial problem of how to really differentiate a brand – particularly in, say, an emerging market where it may be relatively unknown – has become a particularly thorny issue. Here, those wealth managers that are very good at what they do might be really missing a trick in not making more of their investment management performance, according to David Haigh, chief executive of Brand Finance.

Haigh’s company produces various league tables assessing the value of brands – ranging from financial services firms to countries themselves – and he is adamant that, while it may be difficult because of confidentiality concerns, creating a fanfare over performance may be the key to true differentiation in a crowded market. From a branding and marketing perspective, wealth managers find it hard to really stand out from their peers, but for Haigh one “no-brainer” is to make it easy for clients to pick out the winners by comparing a typical portfolio’s performance to that of the markets. In his words, for clients “comparison is critical”, and while service quality and the luxe touches the industry sets so much store by are an invaluable part of the mix, he believes at the end of the day it is hard numbers which really count.

Coy over figures

Wealth managers are notoriously coy when it comes to disclosing fees and performance figures, but while this may historically have been the status quo, firms are increasingly waking up to the reality that the tide of greater transparency over fees and performance cannot be turned back. Since the crisis many clients want to delve more into the “nuts and bolts” of their money management; they want to know what they are getting for their money and what value their wealth manager is really adding. The way that the internet and social media are now so embedded in daily life has also arguably engendered an information-hungry and investigative client mindset where people want to compare fee and performance data for themselves. So far, however, this demand for transparency doesn’t appear to be being met very well, although it should be noted that most wealth managers will provide fact-sheets on their basic fee structure on request.

One very pertinent piece of research on this issue was a 2011 study by MyPrivateBanking looking into how user-friendly and informative wealth management firms websites are - and the results were pretty damning, particularly when taken in the context of it increasingly being the cultural norm to compare prices via independent internet research. MyPrivateBanking found a perhaps shocking lack of hard numbers on firms’ websites, even for arguably less sensitive data. Nearly half did not disclose AuM figures or minimum asset thresholds and only a third of the websites offered even basic information on fees and costs. There were exceptions, however: Deutsche Bank (joint second in the rankings) was singled out for its transparency on wealth management fees.

That there is a lack of transparency over fees is of course in some part due to “the nature of the beast” as fees have a number of different elements, such as fund managers’ charges, administration fees and advisor fees. Also, it hardly needs to be said that wealth management clients vary hugely in terms of the services and business lines they will need to access as part of their unique “package” and so it is extremely difficult to facilitate a meaningful like-for-like comparison on fees between providers. As Peter Collier, spokesperson for UK private bank Brown Shipley has previously told this publication, “Some journalists are wondering why there is no ‘compare the market.com’, but it is simply because we are in the business of bespoke solutions, and it is too complicated to compare.”

But while it may be the case that like-for-like comparisons are difficult to make, wealth managers who cling to this as a reason for drawing a veil over their fee structures will not escape increased scrutiny and negotiation – particularly from younger, entrepreneurial clients (the numbers of whom are exploding in the Asia-Pacific region). “Private banking is not necessarily a very privileged service with oil paintings and meetings in expensive restaurants in Geneva; some clients now see it more as a standardised service – somewhat like a mobile phone service,” Steffen Binder, co-founder and managing director of MyPrivateBanking, told this publication at the end of last year. His organisation, which pushes for improved client service, advises clients that they can typically push any private bank today to lower their fees, to somewhere between 30 to 70 per cent, from their list price.

Let the numbers do the talking

So, if fees are difficult to compare and subject to negotiation, making them therefore hard to hang a firm’s USP on, might it not be better to focus on end results, i.e. portfolio performance against the markets?

Haigh makes the salient point that a firm could powerfully differentiate itself simply by being upfront about its relative performance as this is so rare, but he concedes that this is as much a product of client confidentiality as it is the frankly lacklustre portfolio gains most firms will have posted over the past few years. “Discretion means there isn’t a lot of comparative performance data, which makes it difficult to differentiate an offering,” he says. This is certainly the case for clients looking to compare providers via their websites: the MyPrivateBanking survey previously mentioned found that just 10 per cent of firms’ websites offered performance data for a typical portfolio.

As Haigh notes, the relative lack of comparative portfolio performance data stands in stark contrast to the ease with which clients can compare the performance of funds to their benchmarks and find out if they deliver. He points out that the ultimate positioning difference is whether products and firms actually do what people want them to – and in the case of wealth management that is undeniably to preserve and increase clients’ wealth.

A lack of hard portfolio performance data puts clients in a difficult position and essentially in the dark, according to Haigh. “As a consumer you’re going on trust that the firm is good… how do you compare whether a firm is doing a good job?” he said. There are of course benchmarks available to use in such comparisons, such as the APCIMS Balanced Index, but whether firms use them to showcase their prowess effectively enough is another question. As various studies have shown, what one tends to find in firms' marketing literature is an emphasis on their illustrious heritage but not only is it the case that this therefore does little in the way of differentiation, it could also be quite simply not what excites the client of today. 

Of course, reluctance to use comparative data may be rooted in the fact that performance hasn’t actually been that good recently, but for those firms which can boast of outperformance it can be the most powerful hook with which to entice potential clients. As Haigh puts it: “The ultimate marketing tool is to communicate that you are the Berkshire Hathaway of the investment world.” This however, is obviously an option open only to a select few, and so, according to Haigh, “the question firms need to ask themselves is ‘do we deliver?’”. If they can answer “yes” then, in his opinion, the way for such wealth managers to differentiate themselves is clear. If a firm's investment management performance was impressive enough clients “almost wouldn’t care about the brand positioning”, he argues.

In Haigh’s view, the most powerful brand position would be something along the lines of “we’re winners, we are a bank for winners” – and those firms which can convey this convincingly are the ones which will streak ahead in brand strength.

For more on these issues look out for a forthcoming research report from ClearView Financial Media, entitled Reaching Out To The High Net Worth: Branding And Marketing Strategy Across The Global Wealth Management Industry.