This is a different role for me. I’m not usually the naysayer in the crowd. Nay is not something I ever say. But a piece published by EY in the UK about the urgency of social media to the asset management industry worldwide has me struggling to suspend belief.
Specifically, the EY EMEIA Asset Management Viewpoint "Asset management and social media," with a November 2013 date but published online December 19, envisions a much more evolved and involved industry in just six years:
"The effective use of social media does not just have the potential to improve asset managers’ revenues. It also offers some unique benefits in the post-purchase evaluation phase, by giving asset managers the chance to gather feedback direct from individual investors. This is not limited to views of fund performance. It includes the opportunity to engage with investors to better understand other drivers of their satisfaction. Asset managers can then use this insight to shape their development of products and services."
So much would have to happen in order for most of this to come true. I just can’t see it. I recommend you read the full report (link opens a PDF). Here's my reaction, I'd love to hear yours below.
More Direct Sales in the UK
Straight up, let’s acknowledge that retail distribution in the UK has a different composition than in the United States.
In the UK, according to the Investment Management Association, more than half of retail sales come from fund platforms, and that rose six percentage points from October 2012 to October 2013. Forty percent of 2013 sales came from Other Intermediaries (includes wealth managers, stock brokers and IFAs). That share fell from 45% just one year earlier. Direct sales are about 7%.
By contrast, according to the Investment Company Institute in 2012, 82% of funds owned outside of a retirement account by households were purchased through an investment professional.
If social media—or, increasingly, social business—is going to shape asset manager relationships with investors in the United States, financial advisor intermediaries are going to be a part of the equation. That’s one point of departure from what EY's proposes as a global vision.
U.S. Firms Are The Most Advanced
The report characterizes social media in the asset management industry “as very much in its infancy.” Every once in a while, I’ll talk to someone from a European publication and they say that the U.S. market is easily more advanced than the UK. Just 10% of European asset managers “see social media as a key element of their marketing efforts, compared with almost 50% in the U.S.,” according to Cerulli Associates research quoted in a June 2013 Ignites Europe article.
If our experience is the most advanced, I feel quite certain that EY’s plan for 2020 is off the mark.
As we begin 2014, online interaction with most U.S. asset management firms is limited to non-existent. Few of the relatively few firms that offer blogs allow commenting. The industry's most followed Twitter account, @PIMCO, doesn’t reply, retweet or follow whatsoever. The recent change to Twitter activity has been a pullback—replies from most accounts are confined to customer service responses and retweeting has virtually stopped. Across U.S. firms, some are still fighting the battle to add social sharing icons to their Websites.
With that as perspective, take a look at what EY expects asset managers worldwide to be doing in six years.
I’m not saying that this vision wouldn’t 1) be cool (or that most digital marketers wouldn’t be all over it!) and 2) be consistent with how social is changing other businesses. And, indeed, random tweets directed at firms suggest that some people are becoming to expect more of this. It doesn't occur to them that asset management firms should be any different. And by that I mean, pretty much the same as they ever were.
The interactions EY envisions would require wholesale changes. These go beyond considering social media "a key element in marketing." They would revise how everybody within the firm does business. Legal/Compliance would have to greenlight the establishment of forums for asset managers to respond to criticism or negative stories. And the money managers would have to participate, with Customer Service, Sales/Marketing and IT all in the mix as well. Systems would need to be overhauled, if not built.
Most important: These changes would have to be preceded by agreement that the business needs to evolve in this direction, and development of a business-transformative strategy. (For more on this, read Altimeter Group's The State of Social Business 2013.)
All of this by 2020? No way. I know of few firms working on plans to more broadly include financial advisors in strategic direction, product development and feedback, let alone investors.
As Time Marches On
Much of the EY argument hangs on the emergence of inflows from Generations X and Y and increasingly social investors. In the United States we see plenty of industry random discussion about the implications. Two recent examples: Fidelity believes the advisor’s role will evolve to “validator.” Finect looks for social interactions to drive more transparency—in the selection of advisors and products—in 2014.
But I see no call to change. It's outside the traditional industry participants where do-it-yourself wealth management sites are working on offering some of what EY proposes.
I was eager to read this EY report. To date, firms have been following their own paths on the social networks, publicly sharing very little about their strategies. There has been no industry articulation of what the promise of social business is for investors or intermediaries, no shared roadmap.
The EY report—unless maybe it’s a straw man?—isn’t it. Is anybody else working on one?