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Financial Communication: A Tool for Business Growth

Javier Ferrer, Director of the Financial Communication at the agency PROA Comunicación, explains to whom financial communication is addressed, what does it contribute and what challenges are associated with financial communication.

To whom is financial communication addressed?

Financial communication is a supporting business tool for companies in the world of finance: banks, insurers, fund managers, portfolio managers, financial intermediaries, investment services companies and family offices.

How can financial communication help businesses?

It helps a business to position their brand as unique compared to their competitors, bringing the qualities of each particular business model into market and to different audiences – the media, social networks, consumers and institutions. It also serves to manage their reputation, providing transparency when they face difficulties and specialization when it comes to reporting on business results.

What does a financial communication service require in order to be effective?

It requires highly specialized teams in activities that generate income for financial institutions: investment advising and management, financial planning, transactional banking and financing. It also requires extensive knowledge both of the value proposition of the products and services a company offers as well as the distribution channels through which each business reaches its customers.

What are the challenges facing financial communication in the current business environment?

Digitization is a big one because it leads to significant savings in distribution costs, provides operational and consultative advantages for customers, thereby forcing business models to transform. The tightening regulations, in the Spanish case with Mifid II, is also important because it requires distributors and product manufacturers to change their revenue model as well as provide more effective protection of the client’s interests. Specific to banking, reputation management continues to be a challenge to improve an image damaged by the inefficiencies that caused the 2008 crisis and the subsequent restructuring in this sector.

Diversification and focus on business, values of communication specialized in asset management

According to Inverco figures, the market for Collective Investment Institutions (CIIs) in Spain has doubled in size in the last five years. Between 31 December 2013 and 30 June 2018, the total volume of Collective Investment Institutions (CIIs) (investment funds, pension funds, Sicav, real estate CIIs and foreign CIIs) increased from 344 Bn € to 591 Bn €, an increase of 58%.

According to the CNMV, in Spain there are almost 120 Collective Investment Institution Management Companies (SGIIC) registered. In addition, there are 36 international managers associated with Inverco that market foreign CIIs to national clients, both retail and institutional. These managers provide a volume figure of 164 Bn € at the end of June 2018, whereas at 31 December 2013 there were 25 managers providing a total figure of 55 Bn €.

The Spanish market is, therefore, a business opportunity for companies dedicated to asset management, both national and international. Advances in technology, open architecture, low interest rates and economic growth are among the factors that have driven investment in these financial instruments.

Its advantages, and its ability to optimize investment, are key to volume growth because the funds provide diversification that reduces risk, access through experts to markets, assets and geographical areas, a wide universe of products available, and favorable taxation.

Brand Qualities

Communication specialists ask ourselves: How can we help the business of management companies?  Getting distributors to choose funds from our management clients, as recipients of investment decisions for their clients.

The first step is to position the brand of the manager with the qualities that define it

  • What type of manager I am: national, international with a more or less extensive presence in the market, independent, belonging to a financial group, author’s manager, wealth manager…
  • How do I add value: What are my competitive advantages in terms of volumes, the markets I work in, the quality of my managers, the profitability of my products, the management styles I use, the quality/risk ratios of my products, whether I rely on active or passive management, costs, the breadth of my range, whether I co-invest with my participants, whether I am flexible in decision making…
  • What are the ways for me to grow: whether I target private clients, or institutional clients, and which segments (private banking, personal banking, retail, business); how and through what channels I want to distribute my products in the market.
  • How do I adapt my business model to a new regulatory environment that reduces retrocessions for the sale of funds to the distributor.

Communication actions

The second step is to choose the recipients and the communication actions to be carried out, in order to consolidate the perception of the brand that the manager wants to transmit.

To this end, actions should be diversified, depending on the audience and the content that achieves the greatest impact:

  • Mediators: Professionals such as bankers, financial agents, fund selectors, analysts, advisors, or managers working in EAFIs, private banks, commercial banks, securities agencies and companies, family offices, insurance companies, etc. The most efficient way is to hold events on market/asset/geographical vision and on products, which provides positioning and personal contact with the mediators.
  • Users of online distribution platforms: Actions to strengthen brand presence that highlights the competitive advantages of the manager in online media, SEO and SEM positioning in social networks, or specialized forums and blogs.
  • Final Investors: Actions to generate a more massive brand presence, highlighting the competitive advantages, and those of their products through marketing. Actions that can materialize in general and specialized online and offline media, social networks , blogs, forums, sponsorships, advertising, other marketing actions, etc.

In conclusion, a communication strategy specialized in content, diversified in actions and focused on the client’s business objectives, is the best response to the needs of those managers who want to take advantage of the strength of the Spanish fund market.

Javier Ferrer

Proa Comunicación Consultant specialized in the financial services industry