The awareness of Asian brands elsewhere in the world, and even within Asia, is low. The participants of our roundtable in Hong Kong discuss how they build and protect their brands in a region where, as one of them puts it, any two countries have as much in common as the Czech Republic has with Mexico. Chaired by Stefanie Eschenbacher.
Peng Fei, managing director, global investments and QDII, E Fund Management (Hong Kong)
Blair Pickerell, head of Asia, Nikko Asset Management
Terry Pan, managing director, head of Hong Kong business, JP Morgan Asset Management
Alexis Ng, managing director, Southeast Asia, head of distribution, Asia, First State Investments
Jack Wang, managing director, head of sales group, CSOP Asset Management
Funds Global Asia: Asia is a brand-conscious market, with the Greater China region alone forecast to account for 44% of the global luxury goods sales by 2020, compared with 15% now. To what extent can this brand-consciousness be found in the financial services industry?
Alexis Ng, managing director, Southeast Asia, head of distribution, Asia, First State Investments: There is nothing aspirational about brands in the financial services industry. Asset managers have to organise their entire business around making sure the clients’ experiences are consistent with what their brand is trying to express.
Jack Wang, managing director, head of sales, CSOP Asset Management: Brands are so much more difficult to build in the financial services industry, but are easily destroyed. No matter the resources spent on building a brand, an event like the Ponzi scheme by Bernard Madoff can negatively affect the entire financial services industry.
Peng Fei, managing director, global investments and QDII, E Fund Management (Hong Kong): Luxury goods are tangible objects. Consumers can see them, feel them, and show them off. It is more complicated when it comes to financial services.
Blair Pickerell, head of Asia, Nikko Asset Management: Luxury goods are all about projecting status – driving a Mercedes, eating at the Ritz Carlton, wearing Chanel. This behaviour can also be found in some parts of the financial services industry, like private banking, where being affiliated with a certain bank can project status.
Terry Pan, managing director, head of Hong Kong business, JP Morgan Asset Management: Brand consciousness in the financial services industry has been gaining traction in Asia and is no longer limited to private banking, where it has always been prevalent. Even in the mass market, customers have certain expectations now. They want to be made to feel special by not having to wait in line, being able to speak to a manager and get personalised advice.
Ng: Asset managers are not paying enough attention to communicating with end-clients, especially at points when the products are underperforming. They will naturally focus on delivering consistent performance, but no strategy is going to perform under all market conditions.
Pan: The big differentiator in our business is people. Other than performance, it is important to convey the feeling that we are client-focused. That kind of experience is important to clients so it should be central to our brand proposition.
Ng: We also face the additional challenge of expressing our brand through intermediaries; the further asset managers are away from their end-clients, the more difficult it becomes to express a brand.
Pan: Explaining how a strategy works, how it has impacted performance in the past, and how it is likely to drive performance in the future, is important. Neither can we predict, nor should we promise returns, but we need to be prepared to offer clients an explanation regardless of how the market moves.
Wang: It is hard to establish a brand in Asia, especially in the financial services industry, a rapidly changing industry, where so many brands are emerging. One possible way asset managers have managed to establish themselves in the past is by a prolonged period of outperformance that has attracted talent as a result. Establishing a brand is about maintaining this outperformance as well as being able to handle times of underperformance and provide a good customer experience.
Funds Global Asia: Have you had to adjust your brand strategy in Asia?
Pickerell: Brands are built differently in Asia, even within Asia. If we launched the same fund in Taiwan, Hong Kong and China – three markets in the Greater China region – we would have to position them differently. Indonesia has as much in common with Korea as the Czech Republic has with Mexico. We cannot market our products the same way across all Asian countries.
Wang: In Asia, the majority of brands in the financial services industry focus on safety. Clients may allocate 90% of their assets to the large, established asset managers that have been safe for a century, even if their returns have been mediocre.
The question is whether they will trust newcomers with a few years of good performance with the rest of their assets?
Pickerell: Much depends on the stage of development in the market. When targeting first-time or second-time investors more efforts are necessary to convince them. While some investors are looking for long-term solutions, others like to speculate.
Fei: If the majority of the industry is delivering low quality products or services, then newcomers will have low barriers to entry. The luxury goods industry, for example, has high barriers to entry. Luxury goods companies maintain high quality and the past years have seen few instances where consumers were let down. Whereas many products in our industry have performed poorly over the past years.
Pickerell: Another important factor is how much of the market is push versus pull: an asset manager with a relatively unknown brand is heavily dependent on a distributor pushing the product. This strategy shapes the brand, until the assets under management reach a certain size or until the asset manager builds a strong reputation. Asset managers have also tried to create pull factors by launching products that make consumers walk into a branch of a bank and ask for that specific product.
Fei: There are many good examples from the luxury goods industry, which achieved tremendous success in China. Those companies did adjust their strategies for China because the market is different. Even the goods, ranging from shoes to scotch, are being adapted.
Funds Global Asia: What are the legacy issues of having an established brand?
Pickerell: Many asset managers are actually subsidiaries of commercial banks, investment banks or insurance companies. Trying to craft out a new brand when there is already a prominent, existing parent brand is difficult. Some asset managers inherit a brand, whether they like it or not.
Wang: We are not expanding into Europe and positioning ourselves as an asset manager that can be all things to all men. Neither do most of our Chinese peers. Either we have to market our expertise in a specific asset class or have a super star in a particular sector. Simply claiming to be an expert in China or Hong Kong is not going to win clients either; we all are experts in China and Hong Kong.
Pan: Asset managers may want to reinvent themselves or position themselves differently, especially when entering a new market or are trying a new product. In this case, a legacy brand value may work against them.
Ng: There are certain fundamental values of a brand that should help to define the expectations of investors. Those fundamentals should remain the same, regardless of the market.
Wang: With the exception of Japan, in Asia there is more of a willingness to try something new. In a fast-growing environment were wealth is being accumulated and asset managers that offer only stable, low-risk products preferred elsewhere, may not succeed here.
Pan: There are brand guidelines we adhere to strictly. For instance, all my colleagues around the world have the same business card, for which we even source the paper from the same vendor to get the same quality. We have brand guidelines we have to adhere to. Still, JP Morgan Asset Management has managed to separate itself from the bank business. In the US, the brank branches use the Chase branding. In India, people often confuse JP Morgan with Morgan Stanley.
Funds Global Asia: If the localisation of Chinese brands was the dominant theme in the last two decades, there is now a globalisation of Chinese brands. Is this true for financial services? What are the implications?
Pickerell: Chinese asset managers often claim to have a better expertise in managing Chinese equity than their foreign peers. But the China equity and bond teams of some foreign asset managers are often made up entirely of Chinese staff, making the team as a whole no less Chinese than that of a Chinese asset manager.
Fei: Everyone here is a China expert. That is why we try to build a brand around being a stable and safe asset manager, providing long-term investments.
Wang: Chinese expert or non-Chinese expert, we need to understand how the country operates and how international players fit in. Every company
has to be nimble, constantly reinvent itself and live up to its brand values.
Pickerell: Foreign asset managers have an advantage because they can gather assets from large institutional investors overseas Chinese asset managers have not yet convinced consultants and institutional investors that they have sufficient risk management systems and best practices.
Fei: Chinese asset managers care about risk management just as much as their foreign peers. Local insurance companies, for example, will not trust an asset manager with their assets if no appropriate risk management procedures are in place. Today, many pension funds, sovereign wealth funds and other institutional investors are putting money into our funds because they believe we are true China experts. It is all about communication and goes back to building a brand.
Wang: With the internationalisation of the renminbi and the subsequent opening of the Chinese capital market, awareness of Chinese brands is definitely on the rise. We have managed Chinese equities and bonds for so many years in a regulatory environment where what we can offer to the rest of the world is limited; now we see opportunites.
Fei: The barriers of entry to the Chinese asset management industry are not the competitive advantages of the larger, established players but their relationship with the state-owned banks that distribute their products. Chinese asset managers will have to get used to the fact that competitiveness will increase as the country opens up.
Funds Global Asia: How can you communicate your brand values in a joint venture?
Ng: Brand value is created over time and it requires persistence to stick with it. Coming into a Sino-foreign joint venture as the foreign partner, we appreciate the fact that it needs time to communicate how we approach investments. There is always a philosophical struggle and I am not sure anyone has found a perfect solution to how to balance the two joint venture partners’ brands.
Pan: Joint ventures are always a balancing act, juggling the demands of two demanding partners.
Pickerell: It is even harder in the sense that Chinese regulations require that the foreign shareholder is a minority shareholder. It is completely unrealistic of foreign asset managers to expect their values to be translated entirely. The best we can hope for is that the management team is willing to adopt the best of both brands.
Pan: A joint venture is a newly created entity and the brand often ends up to be a combination of both brands.
Funds Global Asia: With a few exceptions, the awareness of Asian brands elsewhere in the world is low. In the US, for example, only 6% can recall at least one Chinese brand of any sector. To what extent is this true in the financial services industry? What are the implications?
Pickerell: It is even more of an issue in the financial services industry in Asia. Oddly, all successful regional asset managers are international ones. Those are the ones who have been successful from Korea to Singapore to Hong Kong to Japan. There are few people in Hong Kong that could name more than one - or even one - successful Taiwanese asset manager while few people in Singapore can name a successful Thai asset manager. We do not have to go to the West to run into that problem.
Wang: The entire asset management industry in China is just 15 years old and still heavily restricted. The renminbi qualified institutional investor programme is changing that. Now we offer an exchange-traded fund and more often than not when it is among the top ten traded stocks in Hong Kong, we get quite some exposure.
Pickerell: It is also a balance sheet issue. Even the largest and most successful asset managers in Thailand, Taiwan or India, would be overwhelmed by the amount of resources they would have to spend on becoming a major player in Australia, Japan, Hong Kong, Singapore or China. The large international asset managers are also perceived as more inclusive in the sense that they are hiring people of all nationalities.
Funds Global Asia: How loyal are Asian investors to a brand?
Wang: They are loyal as long as the products are performing.
Pan: People are not investing their money with asset managers that are not delivering. This money is their life savings, their retirement, their social security.
It is hard-earned and will stay only as long as promises are being delivered.
Fei: There are so many factors that can destroy a financial brand, the risk is so much higher of that happening than in the luxury goods sector. There is management risk, performance risk, market risk and then there is the relationship with the client, the quality of the service.
Pickerell: Luxury goods companies can ensure what they produce is of high quality, handbags and cars, for example. It is much harder for a fund manager to ensure the quality of the output.
Pan: Asset managers can even outperform in a downmarket. They can have a plus 5% alpha in a calendar year but still lose 5% because the market is down 10%.
Ng: It is difficult to measure brand loyalty for services, especially those received from asset managers. Investors withdraw money from funds because
they take profits so even if they leave us, we hope they had a positive experience.
Wang: Exchange-traded funds are interesting in the sense that they are a highly commoditised product. There is clear brand awareness among investors because they tend to choose the large, global players, even if smaller, lesser known ones offer the same product for a lower fee. While it is harder to measure loyalty for active products because of the performance factor, it is easy in the passive one.
Fei: There’s first-mover advantage.
Ng: Our industry is so complex because on the one end of the spectrum, size matters. On the other end, a specialist approach matters. There are also sophisticated institutional investors that appreciate a specialist approach and therefore choose a boutique, even if they offer only one product.
There is a limited capacity we can offer in our products so when several of our emerging market products reached capacity last year, we decided to stay true to our promise.
We told potential clients that we were not taking in new money. Our existing clients appreciate that. However, there is a price we pay for sticking to our principles.
Funds Global Asia: How do star managers fit into your brand strategy?
Pan: People like to associate a name and a face with something intangible, like a fund. Over-reliance on one fund manager has its advantages when it comes to marketing to retail investors, but brings all kinds of problems with it. Fund managers leave and then it is up to the asset manager to defend their assets and manage the departure.
Ng: Funds management is a team effort. There is no star fund manager who is behind eveything. Fund managers are supported by an entire team of fund managers, analysts and support staff. “Star fund managers” is a marketing term, created for the person who conducts interviews with the media, meets clients and represents the team to the public. The real question is: Who is the philisophical leader?
Pan: We still work with people in all parts of asset management, be it third-party distribution, corporate institutions, sovereign institutions. Working with star managers and prestigious brands only gets asset managers so far. Business cards can open many doors, but they do not necessarily close business.
Pickerell: Brands are increasingly created on a fund level or capability level rather than a company level. Previously, established asset managers could go out and sell clients anything. These days, there is a realisation that certain asset managers are good at some things but often not at others.
Funds Global Asia: Do you see a lot of me-too products in Asia?
Pickerell: Domestically, there is a mentality to launch me-too products. When fixed income was en vogue, we saw a surge of fixed income funds in the market. The same happened with certain types of equity funds and exchange-traded funds. In China, there are not a lot of niche experts because every asset manager does everything.
Wang: There are some Hong Kong subsidiaries of Chinese asset managers that have made a name for themselves when it comes to a particular asset class, given the global demand for China products is on the rise. But domestically everyone is still trying to be everything to all men.
Pickerell: There is definitely an initial public offering mentality, which means clients tend to buy new funds. There is pressure on the industry to keep coming up with new products. At the same time, many countries in Asia have strong rules around investor protection, making single-country funds increasingly difficult to sell.
Funds Global Asia: What marketing channels do you use in Asia? How does your approach in Asia differ from that elsewhere? Are you contemplating new marketing channels?
Pan: We do more brand advertising than product advertising. There is definitely a shift to social media and online advertising, but for the time being we use traditional marketing channels, especially print media.
Wang: Online marketing is effective, but probably less transparent. For example, one can hire people to click onto banners to increase the volume. It takes a lot of courage to try something new and it gets more difficult the more establish a strategy already is. E-commerce is definitely a trend, especially in China, and also in Asia generally. We have done a fair bit of e-commerce, although online advertising is harder to justify because it is not always clear how much real exposure you have had.
Pickerell: The biggest difference in Asia when it comes to distribution channels and marketing is that it breaks down more country-by-country than in the US or Europe. The channels we use in Australia are different from those we use in Japan and those are again different from those we use in China. We would not even think about targeting Asia in one marketing campaign.
Ng: We often ask ourselves how our marketing messages are being perceived by our end-clients.
Funds Global Asia: Do you use social media at all?
Ng: Not yet.
Wang: We use WeChat.
Pan: We also use WeChat.
Pickerell: We only have a social media strategy in Japan.
©2014 funds global asia