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Thursday, February 14, 2019

Expand Your Footprint: Four Avenues to Explosive Growth
Guest Column by: Sandra Powers Murphy

Looking to grow market share? Struggling to gain platform acceptance in a crowded field? Here are a few rules for the road:

1. Confirm the Product Has the Right Terms

Sandra Powers Murphy
Noble Ark Ventures, LLC / ARK Global LLC
Founder / Founder, CEO
Firms launch strategies, or seek to migrate existing strategies into new structures, without sufficient context regarding what the market will bear.

A manager recently quipped, "The fees don't matter, its all about the value proposition." Hmmmmm ... not so fast. Unfortunately, we are in a marketplace that has very specific thresholds and clearly delineated requirements for acceptance, particularly if platforms are your target market.

Do not make the mistake of defining your competition too narrowly or presuming that if there is one more expensive competitor, or that your value proposition and performance is SO strong, you can work around these constraints. You can't. Great numbers and a differentiated story CAN overcome a lack of track record and AUM in some instances, but it won't overcome required share classes, minimums, fee levels and the like.

Instead of defining your product on your own terms, screening only minimally on well-known competition (which typically has the benefit of brand, marketing dollars, captive audiences and time in market), focus instead on what your top 3-5 target platforms REQUIRE and what their CURRENT trends are.

With the development of fee free funds, and low-cost active ETFs, it is increasingly difficult to set a track record apart from peers and even more so to argue for inclusion of your product on a platform that is already well stocked with lower cost and lower minimum solutions. Growth requires access; access requires a product that meets clearly delineated thresholds.

2. Understand Share Class Trends and How They 'Show Up' In Marketing

We've been through so many share class movements: the C, the load waived A, retirement share classes, institutional. Each share class costs money and adds a bit of complexity to the story, so what should managers looking to grow assets prioritize?

Keep in mind the current trends and take the time to inquire with the platforms you wish to pursue as to what is happening right now. For example, there is a significant shift to 'advisory' platforms that utilize solely I shares where the minimum is waived. This permits the advisor to offer its services, bundled with low cost I share solutions, resulting in an overall fee structure that is competitive with active, A and C class share solutions on DIY platforms.

For smaller clients these advisory platforms might not be accessible and in those cases perhaps brokerage accounts and A shares are the norm, but this might not be the lion share, nor the future, of the asset pool you are after. Additionally, keep in mind that if you elect to lead with an A share, you'll be required to show the A share with the load priced in as part of your performance summary, which is a huge hurdle for a track record to overcome.

In short, ensuring you've got the right share classes for the FUTURE might well be different than what worked in the past.

3. Expand Your Horizons

Perhaps the firm's lead strategy is so differentiated, so strong in its performance track record, and so necessary to a diversified portfolio that you can gain immediate access to large platforms and the product's ranking alone will draw advisors and investors to it. More likely, you are in a crowded space, with existing players that have huge brands and even bigger marketing budgets. Sometimes explosive growth comes from channels and opportunities that are much smaller because they are less cluttered, more directed, and built on relationships rather than thresholds and rankings.

Consider the value of focusing the team's energy on a strong regional platform or series of platforms, bank trust departments and other entities that maintain platforms, but with a different twist and less of a supermarket feel. Perhaps your message will go farther, resonate better, and fit more fully into these organizations. Assets are assets.

Like many things in life, we often get caught up on the biggest names and seek the largest value for our investment dollar. In gaining market traction sometimes less is more.

4. Add Value through Content and Presence

Managers talk about transparency and partnership, but rarely produce sufficient content to deliver on these lofty commitments. Put yourself in the shoes of the advisor or investor for a moment. How do they parse through and prioritize the hundreds of inbound inquiries, requests for their time and their dollars received daily? Who should they read? What should they focus their attention on and where should their dollars go?

Managers continuously want to tout their value add and great performance, but rarely build a compelling case for how the strategy fits in a diversified portfolio. Why is it worthy of an investor's dollars over other available solutions on the same platform and in the market, and why is now the right time to invest?

Market dynamics are constantly shifting. Managers have the unique opportunity and skill set needed to bring a voice to these changing dynamics, and to discuss how they impact the asset class that they are investing in. Managers who produce consistent, differentiated, and focused content are appreciated by the market, and most importantly they are more widely read and tracked. This translates to brand recognition and ideally dollars in the door.

Take a look at what the firm has produced over the past 12 months, what events the firm has participated in and how customized the content has been to their area of expertise. Then evaluate the platforms, channels and specific opportunities the firm is pursuing. Which ones might lead to the most fruitful strategic partnerships in which the manager can become a key contributor of content and ideas related to their specific area of expertise? Have confidence that the content will help to establish the firm as a thought leader and good partner.

The firm's content will not create a competitive advantage for someone else, as many managers fear. There are lots of factors that impact how well a manager performs. Sharing small and specific details of the firmís views, strategy and process does not dilute the proprietary value add that the firm can provide once hired. Sharing small and specific details is how solid relationships, and growth, begin.

Sandra Powers Murphy, founder of Noble Ark Ventures, LLC, which offers the Noble Ark Ventures Business Development Curriculum Series. She is also the author of The Road to AUM: Driving Assets Under Management through Effective Marketing and Sales and the founder and CEO of ARK Global LLC. 

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