Backleading. Guapacha. Shadow position. No? Me neither.

There is an activity that’s enthusiastically practised by a small proportion of the adult population,  Most of these enthusiasts are getting on a bit in years, and few younger people are coming through to join them.  The activity seems to have little to offer to the non-participating millions – it’s low key and under-promoted, it’s full of off-putting technical terms and jargon, getting into it seriously would be quite expensive and you worry that you could make an idiot of yourself if you didn’t know what you were doing.

Clearly, this underdeveloped market represents a massive business development opportunity.  What’s needed is a new generation of services, stripping away all that jargon and complication, delivered mostly online so as to reduce cost and with nice, friendly, accessible brand identities to lessen perceptions of risk.  If we can tick those fairly straightforward boxes, we can increase this size of the market tenfold, twentyfold, maybe even a hundredfold.

I’m obviously talking about investing, aren’t I, and making the case for the new generation of so-called robo-advisers – Nutmeg, Wealthify, Moola.

Except that I’m not.  Unless you’re one of those enthusiastic practitioners, it probably won’t have occurred to you that I am in fact talking about ballroom dancing (which is indeed the world that those terms in my headline come from).   And now you know that, you’ll quickly realise that those first two paras aren’t to be taken entirely seriously

Needless to say, they’re intended as a thought-provoking analogy, and the thought they’re intended to provoke is that just because millions of people don’t do something, it doesn’t always follow that there’s a huge business opportunity awaiting any new market entrant who can make it easy, free from jargon and cheap to do.

To make the same point in a consumer-centric way, consumers may have reasons not to do something that are far deeper and more difficult to overcome than simply perceptions of high cost, complexity and jargon.

This is not to say that these bigger barriers can’t be overcome:  with shrewd insights and targeted marketing, many of them can.  And it’s also not to say that lack of jargon, simplicity and low cost don’t matter:  they do.  As the saying goes, they’re necessary but not sufficient characteristics of any new service that stands any kind of chance.

But think for a minute about some of the reasons, actual and perceptual, why some 40 million UK adults don’t do any DIY investing;  and then go on to think about the sort of propositions that new services would need in order to break through those barriers and start changing their minds.

I think on the whole that trying to trigger the renaissance of ballroom dancing might be an easier task.

 

New hope for robo advisers, and what “watershed” really means

Do you actually know what a watershed is?  I suspect it’s not what you think.  If you’re like me, you probably think the term refers to some sort of crest or summit, where the key point is that on one side water flows in one direction, while on the other side it flows in another.  So the expression “reaching a watershed” means reaching one of these points at which water starts to flow differently.

Completely wrong.  A watershed isn’t a point at all.  It’s an area of land.  Specifically, it’s an area of land where water all flows in a single, particular direction – typically into a single river, lake or sea.  So you don’t really “reach” a watershed at all.  It would be much clearer to say that you “cross” from one watershed into another – moving from an area that, say, drains into the English Channel into an area that drains into the North Sea.

So, using this correct definition of watersheds, it seems to me that this is a good time to wonder whether, or not, the Neil Woodford/Hargreaves Lansdown saga will turn out to be one.  Or, more accurately, two – a pre-Woodford/Hargreaves world in which direct private investors’ money flowed in one direction, and a post-Woodford Hargreaves world in which it flows in another.

Let me explain, promptly abandoning  my complicated watershed analogy before it starts making any kind of explanation entirely impossible to understand.

Pre-Woodford/Hargreaves, most direct private investments flowed towards star fund managers and star fund management firms.   Woodford, first as a manager and more recently also as a management firm brand, has been pre-eminent among these for some years now.  But only-slightly less-heroic examples have existed for years among managers – remember Anthony Bolton at Fidelity?  Or Bill Gross at Pimco, Bill Miller at Legg Mason, or Terry Smith still flying high at Fundsmith?  And among firms, both of John Duffield’s retail brands, Jupiter and New Star, stood squarely for manager-driven outperformance, and today so do boutiques including Neptune, Artemis and Octopus.

Most of these people and most of these firms are, or were, at heart, stockpickers, and their apparent stockpicking successes chimed with what private investors thought – and mostly still think – successful investing is all about:  spotting the opportunity that the herd hasn’t noticed, piling in and making a packet when the herd eventually catches up.

Some other characteristics go along with this approach.   Funds managed in this kind of way are expensive, because people with these allegedly-exceptional skills don’t come cheap – and anyway the charges don’t much matter given the kind of outperformance investors are anticipating.  They’re fairly opaque:  lists of their holdings may be visible, but they’re naturally quite hard to evaluate, because by definition they represent the star fund manager’s idiosyncratic views rather than the view of the market as a whole.  They’re likely to be fairly concentrated, or at least not very diversified, because they’re limited by the scope of the star manager’s  semi-supernatural powers.  And, of course, when things are going well they’re likely to be able to point to a wonderful performance record, which proves the ability of the manager and sets the snowball rolling faster and faster down the hill, although when it comes to successful investing  a snowball analogy only works if we imagine that snowballs can roll up hills.

When things are going well, those performance records and the individuals and firms achieving them are sure to get a lot of coverage.  The firms themselves will bang the drum as loudly as they can, of course – and when it comes to coverage in personal finance media, both online and offline, they’re pushing at an open door.   Everyone with a stake in the retail investment industry needs stories of profit and success:  they may not sell quite as many newspapers as stories of catastrophe and failure, but they play a vital part in keeping the wheels turning.

And one final point:  if you’re wondering how most direct private investors have come to believe that all this is what investing is all about, there’s a simple explanation:  they learned it from the professionals.  For reasons that could be the subject of a whole other article to do with the commission-driven pre-2014 world of financial advice, for many years the very large majority of investment advisers devoted most of their energies to this same pursuit of star managers and firms, and the results were reflected in the portfolios they recommended to their clients.  Since most direct private investors either used to take investment advice, or (in most cases) still do, these professional role models have had enormous influence.

All of which would all be absolutely fine and would all make excellent sense were it not for one small but irrefutable problem:  as an approach to investing, it doesn’t work.  It’s not a good way – and certainly not the best way – for investors to make the most of their money.

When you think about it, you know all the arguments against it.  This piece is not about shady or unethical practices, so I’m not going to touch on those: let’s stick to the mainstream investment considerations, of which the big four are as follows:

  • No active manager outperforms indefinitely. The US equity manager Bill Miller achieved fame a few years ago as the only fund manager who had ever outperformed the S&P500 index fifteen years running:  then he became famous as the fund manager whose flagship fund lost two-thirds of its value in the sixteenth year.
  • Charges really matter. Over, say, twenty years, a difference of 0.5% p.a. can make a difference of well over 20% in the value of your investment.  It takes a remarkable – and sustained – stockpicking ability to make up for that.
  • By the time you’ve noticed, it’s already too late. If, say, you look for three years’ outperformance to confirm a manager’s exceptional skills, the chances that he or she will achieve a fourth year, let alone a fifth or sixth, are already vanishingly small.
  • Diversification works. By spreading your money broadly, you gain far more in limiting the downside than you lose in capping the upside.  If you don’t believe me, ask Warren Buffett,

Now of course it would be quite wrong to suggest that these four big, simple, long-established arguments are unknown among private investors, or indeed that there isn’t a large and growing number who fully buy into them and conduct their investing activities accordingly.  They aren’t (unknown) and there are (a large and growing number.)  The proportion of total retail investments held in low-cost passive funds of all shapes and sizes has been increasing significantly for years.

But it still has a long way to go.  Arguably the lowest-cost and most flexible passively managed fund type, Exchange Traded Funds (ETFs) still account for well under 1% of UK investors’ retail investments in the FTSE-100 Index – a clear sign that this kind of investing still doesn’t represent the mainstream.  To us retail investors (unlike our institutional counterparts, who are way ahead of us on this), hitching our investment outcomes and our long-term financial prospects to the performance of high-flyers like Woodford is still “proper” investing.  Spreading our money across a bunch of very low-cost trackers or ETFs is…well, a bit second-rate, a bit of a cop-out – a guarantee of mediocrity.

Well, if what’s happened to Neil Woodford’s funds in the last year or two is an example of the alternative to mediocrity, then mediocrity is absolutely fine with me.  Again leaving aside any rumours of hanky or indeed panky which have been swirling around the funds in the last few weeks, virtually everything that can go wrong with a star managers’ funds has gone wrong with Woodford’s.  You can explain the crisis in rational investment terms – too many bad and under-researched stock selections, resulting in sustained poor performance, causing unexpectedly high levels of redemptions, creating pressure to dispose of many of the funds’ more liquid assets, resulting in  an increasingly illiquid portfolio, raising eyebrows  at the regulator, and so on and so on.  But really it’s an emotional crisis, about a man who had too much money to invest too quickly, made a bunch of bad choices and has been chasing his losses ever since.

(A friend looking to finance a high-profile start-up pitched to Woodford in the great man’s firm’s early days.  He was looking for £10 million.  “I have billions to get away in the next few weeks,” Woodford told him.  “For £10 million, I can only give you 15 minutes.”)

Which brings us back to that watershed again.  I’m not suggesting that all direct retail investors are on the point of abandoning that quest for the outperforming superstar, any more than I’m suggesting that they’ve all been committed to that quest hitherto.  But what I am saying – well, hoping really – is that forces are now at work which will create a New Normal – a change in our understanding of what’s the main thing we should be doing most, if not all, of the time.

And this is the point at which we arrive at a big and unexpected twist in this tale.  What, you might be wondering, is that main thing we should be doing?  Does it exist?  And if so, where is it to be found?

Well, it seems to me that it does very much exist, and it’s to be found on the Internet – where, in recent years, a large tribe of fintech-driven start-ups have been building more or less exactly the kind of service that experienced, active smart direct investors really need:  the so-called robo-advisers.

The twist is that very few of the young, entrepreneurial, idealistic teams building these online businesses had this target market – of experienced, active, smart direct investors – in mind at all.  On the contrary.  They all believed – and many had market research to confirm it – that this market was already very well served.  Among suppliers to this segment, one name stood out head and shoulders above the others:  it was of course Hargreaves Lansdown.

Challenging this established giant on its own turf seemed like a suicide mission.  Instead, the robos concentrated on the next level down on the retail investor pyramid – younger, less experienced, less confident, less affluent people daunted by the jargon and complexity of Hargreaves Lansdown and waiting eagerly for a new kind of proposition which would combine low charges and simple, passive funds.

Somewhere between five and ten years after the emergence of the first robo advisers, we can now safely say that on the whole, this strategy has not worked well.  Persuading these younger, less confident people to invest has proved difficult, and horribly expensive.  Most robos have found their cost of acquisition far higher, and their revenue per investor far lower, than the numbers in their business plans.  A few, especially those set up by big institutions with plenty of other strings to their bow, have already withdrawn from the market.  One of these – and, worryingly, one of the few which was able to deploy a fairly chunky advertising budget to support its customer acquisition efforts – was said to have closed its doors having recruited a mere 2,000 customers.

All in all, in terms of business performance, the robo advice sector exists in a troubled and clouded landscape.   A new strategic direction – in the words of Star Wars, A New Hope – would be more than welcome.

And amazingly – almost miraculously – here it is.  The robos are perfectly positioned to provide a Plan B for plenty of those active, sophisticated former members of the Woodford/Hargreaves fan club (and by clear implication this isn’t just about Woodford, it’s about all those other superstar stockpickers wobbling unsteadily on their perches).

Let’s not get carried away.  Even though an awful lot of these people were dreadfully badly guided, and have experienced truly dire performance, I’m not convinced that a large proportion of Hargreaves clients will turn definitively against the firm.  Their bond is too strong – and anyway, there are still many who’ve done very well indeed out of Woodford and out of other funds on that HL 150 selected fund list (reduced recently to 60, although inexplicably branded the Wealth 50).

But while they’re likely to keep most of their assets with the devil they know, I’m sure there has never been a better time to make a case for switching at least a proportion into an alternative.  And what better alternative than the robo-advisers’ very low-cost, passively-managed, highly-diversified bunches of ETFs?

They’ll need a bit of smartening-up to position them suitably for this segment:  a bit less of the Janet-and-John language, a bit more Sharpe Ratios and Efficient Frontiers. But none of that’s hard (or expensive)

And they’ll need some clever marketing, too – marketing that successfully challenges people who are deeply set in their ways, and engages them with the possibility of an alternative.  I’m tempted to think that this is one of the very few segments in one of the very few consumer markets where intelligent and considered argument could just be the best way to do it.

If all this is right in the end, and if this is the way the story plays out, it will only serve to demonstrate one of the greatest and most universal of principles in the field of marketing – that 999 times out of a thousand, when you’re trying to establish a new product or service, you have a better chance if you address  people who already use existing products or services in your category and so who can recognise the core benefits.

But as proofs of that principle go, it would be an unusually dramatic one.

Am I back, or just dropping in?

After nearly a year’s radio silence,the drama and excitement of the current Neil Woodford crisis has moved me to come up with a longish piece.

That being so, I’m going to pot it in a minute and very probably give it a plug on LinkedIn too.

But does this represent the start of a new blogtastic era, or is it just a one-hit wonder?  Only time will tell.

 

Which are more out of touch with consumers: the actuaries or the techies?

For as long as I’ve been involved with financial services, it has been a truth universally acknowledged that actuaries don’t know anything about consumers.  And, arising from this undeniable fact, that financial services firms led by actuaries (if the idea of actuarial leadership isn’t too much of an oxymoron) are bound to be as out of touch with consumers as it’s possible to be.

But increasingly, I wonder whether this is still true.  No, don’t get me wrong, I’m not suggesting that actuaries have acquired any capability for consumer insight, or any other kind of emotional intelligence.  But I am wondering whether there is now a new generation of financial services business leaders, with completely different professional skills, who are even less well equipped to enable their firms to identify and satisfy consumer wants and needs.

Who are these people and what is their skill?  They are the techies, and across countless numbers of fintech start-ups t heir skill is doing brilliantly innovative and complicated things with digital processes that in one way or another will transform people’s financial lives.

If, that is, the people in question a) want their financial lives to be transformed, and b) are able to grapple with what’s required of them to achieve the transformation.

This is not some Luddite yearning for things to stay as they are, or indeed to go back to the way they were in the quill pen era.  But it is a fairly strong suspicion that quite a lot of the very clever new services now on offer are simply too complicated, too demanding and require too much engagement for most of us to enjoy the benefits they offer.

Probably the best example is the whole subject of financial aggregation, a big theme than comes in many flavours.  Once we bring all our finances together and start managing them as a whole, all sorts of good things become possible.  We can “optimise” our financial lives in ways we never could when everything was all over the place.  But will we?  Do we really care?  Are most of us not more likely to stick with the principle of “satisficing” – that great word invented by that great US Economist Herbert Simon to describe the way we’re willing to put time and effort into solving a problem until, and only until, we find a solution that we decide is satisfactory:  as soon as we do, we’ll stop right there, even if further work would have led us to even better solutions.

Techies have an infinite capacity to engage with technology, just as actuaries have an infinite capacity to engage with financial systems.  These exceptional levels of engagement are what make these people important, special and valuable.  But when it comes to designing and developing things intended for ordinary, unengaged consumers, they’re also what makes them very dangerous.  .

Hmm. Have I been wrong about the power of words for all these years?

As a writer, I’ve never felt too much doubt about the power of words over the years.  Of course you have to choose the right words, and specifically the words that will convey what you want to convey to your intended readers, which isn’t easy.  But if you can do that, it’s always seemed to me, words won’t let you (or your readers) down.

However, I have in front of me a document which does rather challenge this assumption.  It’s a 48-page A5 booklet from the guidance service PensionWise titled “Your pension:  it’s time to choose” , and one of its intended pre-retirement age readers is in fact me.

And I can’t get any sense out of it at all.  In fact, I can’t be bothered to read beyond about page 8 or so.

This is partly because the writing style is very boring – flat, dull, colourless, utterly lacking in life.  But it’s more for another reason:  it’s just words. (Well, and a few numbers.)  There’s one font and, as far as I can see, three point sizes, and apart from some tinted text panels and tables that’s all there is for 48 pages.  No graphics, no pictures, no graphs or charts, no signposts (except the front cover, which does literally show a picture of a signpost) and obviously as a printed booklet no video, audio or music.

What I’ve discovered is that today, you just can’t communicate a subject as detailed, lengthy and boring as this when the only tools in your communications toolbox are one font, three point sizes, some tinted panels and something between 15 and 20,000 words.  Yes, the subject is important, and yes it’s of personal interest.  But, even so, it’s just too boring.

And if I’m saying that, as an avid reader and as someone whose understanding of pensions (though pitiful by expert standards) is at least ten times better than average, then so are an awful lot of other people.

So, note to self:  you just can’t communicate with nothing but words any more.  Which, a million or so words into this blog, must be a worry.

 

Book response update: what we used to call “encouraging progress”

Early in my financial marketing career, I did quite a lot of ads communicating companies’ financial results.  This was lucrative work for the agency, but desperately dreary for the poor sods actually doing the work.  Among the investment community targeted by this advertising, there was a recognised short list of coded expressions that were understood to convey precise and surprisingly detailed messages about the performance of the companies in question.  “Poised for growth” meant “still losing money”,  “strengthening the management team” meant “firing the CEO for underperformance”,”  “steady progress” meant “dead in the water”, and so forth.  It wasn’t necessary, or indeed useful, to try to come up with new or different forms of words:  the aim was simply to choose the existing option which fitted the facts most accurately.  (There’s probably an algorithm that does this these days.)

Perhaps the phrase we dialled in most often was the one in this blog’s headline, “encouraging progress.”  This was about the blandest message available, the beigest colour in the colour palette,  It meant things weren’t going too badly, but nor were they going all that well.  You wouldn’t want to sell your shares in a panic, but you wouldn’t be queuing to buy more.

That all seems to fit pretty well with the tenor of this report on my last post, in which I urged the FS marketing community to respond more vigorously to my book on the subject, No Small Change, co-written with leading challenger banker Anthony Thomson.  In response, the following things have happened:

  • The book shot back up to about #10,000 on Amazon, although I have to admit that it has now shot back down again to about #300,000.
  • It has now gathered a total of six Amazon reviews, and although that doesn’t compare too well with, say, the 2,000 or so received by The da Vinci Code, ours average out at 4.8 stars and Dan Brown’s only just over 4 (which I to say I think is absurdly generous).
  • One estimable client has not only read it, but has also sent me a copy of his written critique, to be circulated among his team, which includes, for goodness sake, no fewer than 93 bullet points (the large majority of them positive).
  • Another estimable client has also read it, and, perhaps even more admirably, invited me to discuss it over lunch.

That’s about it, and writing it all down like this I do wonder whether “encouraging” progress might be pushing it a bit.  As I recall, the next level down was “solid” progress – perhaps that captures it better.

Come on, FS marketers, let’s be ‘avin you.

It seems to have been an obscure American humorist called Olin Miller (not Mark Twain, or Eleanor Roosevelt, or any other of the usual famous-quote suspects, and definitely not Delia Smith) who first  made that mildly deflating comment, “You’d worry a lot less about what other people think of you if you realised how seldom they do.”  We don’t know much about Mr Miller, or the circumstances in which he made the remark, but I wouldn’t be surprised to find he’d recently published a book about financial services marketing.

When my co-author Anthony Thomson and I published No Small Change:  Why Financial Services Needs a New Kind Of Marketing a couple of months ago, we didn’t imagine we’d be rivalling Dan Brown and JK Rowling at the top of the best seller charts.  But, to be honest, having included some original and quite controversial ideas, some harsh and probably unfair criticisms, some surprising new market research findings and some reflections from the individual who is now the UK’s, probably Europe’s and now arguably the world’s leading challenger banker (Anthony, obvs, not me), ,I think we have been a tad surprised by the near-complete silence that has greeted us.

One of the more important ideas in the book is that marketers can never blame their target markets for not getting what they have to offer or hearing what they have to say.  If the target market doesn’t get it or hear it, by definition it’s the marketers’ fault.  Exactly the same is true of authors.  By definition, if people don’t know of the book, or if they do but can’t make any sense of it, then it’s our fault (and maybe also a little bit our publishers and our PR people).

But even so, it’s not quite that simple.  We do know that a lot of our friends, clients and contacts have bought it – after all, we signed several hundred copies at our various launch events – and even if most just bought copies to be nice and show support, there must have been some who intended to read it, or at least part of it.

And yet we’ve only had four reviews on Amazon, and while they are all perfectly genuine reviews from real people who’ve read the book, three of the four did result from email exchanges in which we said how grateful we’d be if the individuals concerned could write up some of the nice things they had to say.  And of course it’s a mixed blessing that all four of the reviews all give us five stars – hasn’t anyone managed to find anything they’re upset about (not even at Barclays)?

I don’t think I’m going to say any more on this subject, because I can feel that I’m on the brink of blaming my readers and that really is a cardinal sin.  But encouraging my readers is OK – so, come on, chaps and chapesses,let’s be aving you – there’s still plenty of time to say something, appreciative, or indeed otherwise.

Making sense of the Moola deal. Or trying to.

Last week we heard news of the latest, though undoubtedly not the last, acquisition of a sprightly young fintech by a cash-and-customer-rich sugar daddy – this time the fintech being robo-adviser Moola, and the daddy being benefits firm JLT.  The stated rationale, which you’ve probably deduced from the identities of the firms, is that everyone’ll win from the introduction of Moola onto JLT’s Benpal (terrible name!) benefits platform. Employees get a new savings and investment option, Moola gets a cheap source of lots of new customers, JLT gets an incremental business stream and I suppose if I was being cynical I’d say that if employees can be steered into Moola rather than increasing their pension contributions, employers might get a welcome reduction in their contribution-matching bill.

What’s not at all clear to me is whether all this is going to work, and if so on what kind of scale.  It comes down – as it has in quite a few other recent blogs – to the question about the level of appetite that exists out there among the public at large for simple, accessible, fairly low-cost investment schemes.  As my regular reader knows very well, I’ve always been massively sceptical about this – and my scepticism hits new heights in the context of an employee benefits platform, where the option most people really should take. increasing their pension contributions, is right there under their noses alongside the non-pension option.

What I think the acquisition does tell us is that up to now, Moola has been struggling to recruit customers at an affordable cost.  (In fact, we knew this already, partly because all robo-advisers are struggling to recruit customers at affordable cost, but also because Moola rather gave the game away with a desperate-looking promotion back in the Spring, offering new investors a whopping 10% cashback after a year.  Canny investment hobbyists immediately took to the message boards encouraging each other to buy in for exactly 366 days and then promptly walk away to grab the best offer on the market in Spring 2019.)  But whether appearing as an option on JLT’s Benpal platform will really change their customer acquisition prospects can’t yet be clear.

Wearing my ever-present sceptical hat, I’d say those prospects aren’t great.  As for whether the parties to the deal would agree with me, I don’t suppose we’ll ever know – or at least, not unless or until JLT chooses to tell us what they paid.

Asset management: the race to be different is on

Over the years, there have been few easier ways to make money than asset management.  It’s not just at the rocket-science, hedge fund end of the market:  for decades, a combination of high and opaque charges, unaware and largely inert customers, uncritical and often conflicted intermediaries and an absence of serious external scrutiny kept the most vanilla of fund managers (of whom there are many) well supplied with six-figure bonuses and top-of-the-range Mercs and Range Rovers.

Perhaps more importantly, these same factors have also combined to keep the market ridiculously overcrowded and undifferentiated.  When you can still make a ton of money running small funds that are exactly the same as everyone else’s and perform no better or indeed rather worse, there are few if any pressures to make the industry more competitive.

Now, though, that’s all changing in the retail market at least, and the active fund management industry is feeling the first stirrings of panic.  Among a long list of things all happening at once, the three most important are:
1.  The somewhat slow-motion effects of the Retail Distribution Review (RDR), implemented in January 2014, which eliminated intermediaries’ financial incentive to recommend high-cost actively managed funds.
2.  The ever-growing body of irrefutable evidence that, not least because of their indefensibly high charges, the very large majority of active funds underperform their low-cost passively-managed counterparts.
3.  The shamefully-belated new effort by the regulator to tackle the industry’s bad practices and help consumers get a better deal.

Over the next few years, the combination of these and other factors will change the industry in many ways.  But the one that most interests me is now clearly apparent:  pretty much all big and reasonably businesslike firms are feeling the need to ask themselves the question:  “What makes us different, a) from each other and b) from passive firms who charge 85% less than we do?”

For most, this is a horribly difficult question to answer, or at least to answer well.  (The troubling answer “Absolutely nothing” is readily available).  A few firms do already own, or in some cases partially own some kind of differentiating idea, and they’re much more strongly placed.  But most really don’t, and it’ll be fascinating to watch them grappling with the issue.

The key issue, it seems to me, will be to do with the balance of power between the marketers and the fund managers.  As I’ve often written in this blog, hitherto this has resided about 98% with the fund managers and 2% with the marketers, whose job is confined to producing the brochures and the sales aids and even then the fund managers tell them what colours they want them to be.

But in the evolving new world in which marketing assets like a differentiated positioning, a strong brand and a convincing value proposition are suddenly absolutely mission-critical, this long-established balance of power isn’t going to work any more.  A bit like star chefs newly-dependent for their survival on their pot-scourers, or airline pilots humiliatingly subservient to the cabin crew, an awful lot of pride-swallowing is going to be necessary.  At the moment, I really wouldn’t like to say whether I think they have it in them.

I was right. We were a better choice for asset management clients.

For obvious reasons I’d better keep this anonymous, but I’ve fairly recently heard some war stories from inside a non-specialist agency pitching for an asset management client.

It’s been pretty fraught, and as you’d expect a lot of the available time has been wasted on getting up to speed with how this difficult and complex industry works, who the target audiences are, what sort of brand promises can be made (and kept) and what restrictions are imposed by the regulator.

But beyond all these issues, most of which I suppose are the sorts of things that arise when an agency starts work in any unfamiliar sector, what’s really struck me is the sheer difficulty of finding a strong creative solution.  All the above issues apply here too, of course, but there are others that present specifically creative challenges.

Of these, two in particular stand out.  The first is the intangibility and invisibility of the whole subject (or at least of 99% of it).  If you’re advertising a beer, there’s a reasonable assumption that you’ll show someone drinking it, or pouring it, or going to a pub, or whatever,  You may not:  but you always could.  Similarly, if it’s a car, I wouldn’t be amazed to see it being driven.  But what does an asset management look like?  Nothing, that’s what.

Then second, there’s the whole.business of uncertainty and unpredictability, which make it more or less impossible to focus on any kind of end benefit.  We may not want to show someone using our shampoo, but we’re almost certain to want to show someone with great-looking hair.  What does someone with great-looking asset management look like, especially on a day the market’s down 10 per cent?

There are plenty of other problems to overcome, but even setting all of them aside these two make it unusually difficult to identify fruitful territory – especially fruitful visual territory – in which to base your creative approach.

In my agency days, I always used to tell clients (or rather, prospects) that they should appoint specialist agencies like mine to solve problems like these, rather than mainstream agencies which – however talented – would struggle even to understand why they were finding it so hard, let alone to identify a solution.  But I always suffered pangs of doubt about whether the mainstream agency people were so talented that it would be worth working through the pain so as to get through, in the end, to the sunlit uplands of a great creative solution.

My recent insight into a non-specialist pitch has belatedly eliminated such pangs.  You’ll never get to the sunlit uplands if you can’t find a way out of the boggy marsh down at the bottom of the slope.