Who would win? Ultimate asset management marketing rumbles we’re watching in 2023
As the founder of a content marketing agency that serves the financial services industry, I probably should read books about Modern Portfolio Theory and the history of index investing. But I’m also a dad with three kids who are seven years old and younger. So I find myself reading more books about animals and the law of the jungle than about markets and the animal spirits of investors.
My kids love the Who Would Win book series by Jerry Pallotta. The books pick two animals and describe what would likely happen if the two species faced off in the wild and fought to the finish. The books are admittedly a bit gruesome but also educational, so I’ll let you decide what this says about my parenting skills. Just read Hyena vs. Honeybadger or Whale vs. Giant Squid, and you’ll get the idea.
These books got me thinking: What ultimate rumbles do I expect to see play out in the jungle that is financial marketing this year? Here are three battles we expect to have a front-row seat for at Wentworth Financial Communications in 2023, along with a few predictions about who will win.
ETFs vs. SMAs for marketing resources
It’s no secret that exchange-traded funds (ETFs) and separately managed accounts (SMAs) are two of the hottest areas of asset management. Both types of investment vehicles are taking assets from mutual funds at a rapid pace. Cerulli projects that ETF assets will grow at a 9.5% annualized clip from 2021–2026 and SMA assets will grow 7.2% a year over that span. Meanwhile, Cerulli forecasts that mutual fund assets will decrease 2.0% annually. (Cerulli projects that direct indexing assets will grow at an even faster pace, 12.3%, but the distinction between direct indexing and SMAs can be blurry, so we’ll keep our discussion focused on SMAs.)
In a sense, ETFs and SMAs aren’t directly battling each other. ETFs and SMAs play very different roles in portfolio construction. In fact, many asset managers are starting to offer ETFs in their SMAs platforms, as Dimensional Fund Advisors announced it was doing in February 2023.
But when it comes to allocating finite marketing resources, asset managers need to decide whether they want to emphasize the low costs, liquidity, and general tax efficiency of ETFs or the personalization and ability to be more aggressive and tactical in reducing taxes with SMAs. Who will win when it comes to getting the most marketing attention in 2023, ETFs or SMAs?
Our prediction: ETFs will continue to throw their considerable marketing weight around and exert their dominance as the emerging king of the investment jungle. SMAs make sense for client segments at certain asset levels, but fees and logistical constraints make it hard to bring SMAs to clients with lower asset levels. Many asset managers are making major strides in lowering these barriers to entry, so even though ETFs have the upper hand now, the battle is far from over. Direct indexing, which essentially uses an SMA-like chassis to deliver customized exposure to broadly diversified strategies, will certainly have a lot to say in the battle for years to come.
Robots vs. human writers for commentaries and fact sheets
The launch of ChatGPT in November 2022 sent shockwaves through the marketing agency world. If artificial intelligence-powered machines can write clever poems and emails, what’s to stop them from creating more advanced forms of content?
It would be incorrect to suggest that the idea of automating investment marketing materials is a new phenomenon. Many asset managers have been exploring ways to automate parts of their content creation for a while, especially when it comes to data-heavy types of content, such as commentaries and fact sheets. Does this mean that robots are going to take the jobs of human writers when it comes to cranking out this monthly and quarterly content?
Our prediction: AI will make inroads in 2023, but human writers won’t be displaced at scale. The technology is incredibly impressive and will continue to improve. But there are aspects of creativity and storytelling that can’t be automated. For example, AI can work well for performance and attribution commentary, but humans are necessary for writing outlooks and analysis that go beyond describing data. Even for less insightful and less creative forms of writing, human editing and quality control will be necessary. Plus, intellectual capital and cybersecurity concerns will prevent many risk-averse financial services firms from aggressively using AI to communicate their investment ideas to clients. This doesn’t mean, however, that AI isn’t a threat to human writers. Smart agencies and firms will figure out how to divide the labor efficiently and draw on the strengths of both types of content creators.
ESG vs. impact for the hearts and minds of financial marketers
The growth of environmental, social, and governance (ESG) investing seemed inexorable heading into 2022. But high-profile political objections in Florida, Texas, and other influential parts of the United States caused many asset managers to either pull back on their ESG marketing efforts or take a significantly more measured approach to how they talk about integrating ESG into their investment processes.
Meanwhile, impact investing, which is a form of responsible investing that focuses on achieving direct, measurable social or environmental results, continues to gain momentum. The Global Impact Investing Network estimates that the amount of capital invested in impact strategies worldwide surpassed $1 trillion for the first time in 2022. Which form of responsible investing, ESG or impact, will gain the most momentum in the hearts and minds of marketing teams at asset managers, investment banks, wealth managers, and private equity firms in 2023?
Our prediction: Impact investing will generate more momentum and positive attention from financial marketers. To be sure, ESG investing isn’t going anywhere. It will continue to be a vital part of asset managers’ risk management and engagement efforts because many investors will continue to demand it. And impact investing faces its own set of regulatory and logistical challenges.
From a marketing perspective, though, the impact story is more compelling and straightforward than ESG. Rather than talking about marginal improvements in a portfolio’s ESG score, impact investing allows marketers to point to tangible examples of how the capital is making a difference in people’s lives or the environment. These case studies, whether about affordable housing developments in low-income areas or green bonds funding the development of alternative energy technology, are easy for investors to appreciate. While there is an ongoing debate about whether investors should expect impact investments to generate competitive returns with non-impact investments, telling compelling stories about the changes that result from impact investments helps investors broaden their perception of their portfolios’ “total return.”
Other ultimate asset management marketing rumbles to watch
These are just a few of the battles in the financial marketing jungle that we’ll be following closely in 2023. Others on the fight card include private markets vs. traditional fixed income for asset flows; active vs. passive strategies for bragging rights; and infographics vs. videos for reaching financial advisors.
Do you have different ideas about how these asset management marketing battles will turn out? Are there other rumbles you think deserve the title card? Send your thoughts to Scott Wentworth, email@example.com.