Financial Communicators are Undervalued by Many Companies

In an era when effective communication is key to building brand and market share, those charged with the responsibility to get the word out are often under appreciated and underpaid.

     The dramatic gains of the stock market have created a new breed of individual investor-one with an insatiable appetite for financial information. Where 25 years ago, many individual investors were content to be spoon-fed a thin gruel of investment recommendations and financial news provided by stock brokers and the popular press, today they want to feed themselves the real meat and potatoes once available only to the buy-side. Along with the new solid food, they also want to make their
own investment decisions. This growing sophistication and independence has forever shifted the balance of power between individual investors and stock brokers, but perhaps most importantly, it's also created new challenges in marketing financial services products.

     One only has to look at the phenomenal growth in on-line investing to see the huge demand for investment information. Working Woman magazine recently reported the number of electronic trading accounts has quadrupled in the past three years, and is expected to top 5.4 million accounts by the end of the year. In fact, in a new millennium version of the chicken-and-the-egg debate, some experts actually credit the information age with driving the demand for on-line investing.

     Whatever its genesis, on-line investing is clearly information-dependent. Dennis Marino, chair of the Internet-brokerage firm National Discount Brokers, told Working Woman, "The one thing that distinguishes the more accomplished on-line investor is her use of readily available information."

401(k)s Fuel Info Needs

     The quest for investment information may have had its roots in the shifting pension plans of America's corporations. As an example, from 1985 to 1997, the number of 401(k) plan participants more than doubled, soaring to 25 million workers in 1997 from 10 million in 1985. 401(k) plan assets now top $1 trillion, up substantially from $200 billion in 1985. As increasing numbers of corporations have moved away from defined benefit pension plans and toward 401(k), profit sharing, and other "participant directed" defined contribution plans, the responsibility for investment decisions-and performance-has been passed to employees.  By giving employees the opportunity to exercise control over their own investments, pension plan sponsors hope to reduce their fiduciary responsibility for investment performance.

     To be free from potential liability, plan sponsors must meet certain guidelines established by the Department of Labor under the Employee Retirement Income Security Act of 1974 (ERISA) Sec. 404©, which includes the responsibility to provide enough investment information so hat employees can make informed decisions. Many pension consultants have lamented that this is perhaps the most difficult component of meeting the DOL's standards since it is almost anyone's guess what
constitutes adequate information.

     A November 1998 issue of Employee Benefit News listed items plan sponsors should provide participants. These include a general description of the investment alternatives available in the plan plus information on each alternative's objectives, risk and return characteristics, and the type and diversification of the underlying assets in each alternative's portfolio.

     The growth in mutual funds has also played an important role in the demand for investment information. Bloomberg News recently reported that long-term assets of all mutual funds passed the $4 trillion mark during the first half of 1999, with no-load funds the most visible recipients of investor interest and dollars. Through June, 66 percent of all fund inflows went to three well-known no-load fund companies: Vanguard Group, Janus Capital Corp., and Fidelity Investments.

     Largely without the benefit of brokers or salesman, these companies have captured assets on the strength of their solid performance and strong brand names.

     How did these mutual fund companies distribute the performance message and meet the demand for investment information? By working with qualified financial marketing, communication and public relations professionals. These are the experts who can help financial services companies successfully market their products and services through professionally written and designed prospectuses, brochures, Web sites, newsletters, and other promotional and financial materials. While it is always difficult to ascribe a company's asset growth to a particular factor such as portfolio performance or marketing efforts, without a doubt financial communicators have played an essential role in telling these companies' stories.

     Currently, the line between marketing channels-indeed, between no-load and load fund companies themselves-seems to be blurring. Dreyfus recently announced that 80 percent of its new customers are coming from investor relationships established by financial intermediaries. As a result, the company has increased its sales force and is now concentrating on marketing its funds through brokerages, banks and insurance companies, many of which charge a sales fee or load. Dreyfus is also closing its Boston walk-in investment center and reassessing the future of other walk-in locations-an indication of how the investment business is changing.

     Where once investment centers attracted do-it-yourself investors, Bloomberg News noted that "now such investors are more likely to be found on-line or in the office of a financial consultant than parked at a desk in a walk-in center."

     While the sales channels for mutual funds may be changing, what stands as constant is the need for qualified financial communicators regardless of distribution methods. Although the fund companies may be scaling down their own consumer-direct marketing efforts, they will still need sales and educational materials that can be used by financial intermediaries. After all, over-burdened insurance agents, brokers or bankers are generally not experts in preparing brochures, fact sheets, presentation books,  and other marketing tools. Financial communicators will continue to play a necessary role in educating do-it-yourself, on-line investors, as well as broker who may be engaged to sell load funds. Nor is the importance of financial communicators limited to a bull market. It can be easily argued that during a bear market, ongoing client communications become critical in helping retain assets.

Recognizing True Value

     To be most effective, financial communicators must be recognized, and valued, as true professionals. Their role as key members of the marketing or communication team must be clearly defined, whether they are employed as full-time staff members or are off-site consultants. They must be included in all stages of strategic planning, rather than being relegated merely to the role of implementing a directed plan.

     It's also important that financial communicators have free access to senior management and are invited to board meetings and other upper level staff sessions. This will help senior management understand the important role financial communicators play in helping to communicate a company's track record, philosophy and approach. After all, if "only performance sells," why don't the best performing mutual funds have a dominant market position? Financial communicators are as much a key asset as portfolio managers or CFOs, and should be valued as such.

     Which leads us to perhaps the most important point about financial communicators: They provide a special skill that no publicly held company or mutual fund could do without. Accordingly, they must be recognized with better benefit and compensation packages. Many of these professionals have invested years in their career through continuing education, or accreditation through professional groups such as the Public Relations Society of America (PRSA) or the International Association of Business Communicators (IABC). Some may have earned securities licenses, MBAs or even CFA designations.

     Although a recent salary survey conducted by PR Week showed the average PR pro's salary in financial services ($104,000) was higher than other industries such as consumer products ($87,000), healthcare ($83,000), and high-tech ($77,000), those salaries are probably not representative of the typical financial communicator. For one thing, they come nowhere near the salaries typically paid to portfolio managers. What's more, many of the financial communicators who actually research, write, and 
edit the copy for a variety of marketing materials may be billed as "specialists," such as senior financial writers or communications managers. One survey showed PR/financial communication specialists in large financial services corporations earned $65,000, those in medium and small corporations earned $53,000, and $40,000, respectively.

     Since the demand for well-written, understandable investment materials is only bound to increase, it's clear that the societal and monetary value we place on professional financial communicators must increase too. After all, what good is strong, long-term portfolio performance or dramatic stock gains if there is no one who can effectively communicate the story?

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Tom Kellerhals is senior partner of The Westminster Group, an executive
search and recruiting firm. He can be reached at 888-436-2101, or via
e-mail at tom@wgpeople.com.