UK wealth management firms cut marketing spend - 14.07.2006
Wealthnet, 14/07/2006, Ian Orton
More evidence of the marketing shortcomings of the UK wealth management sector can be found in the latest report produced by ComPeer, a London-based research and consultancy firm.
TheWealthNET has often highlighted the apparent inability of the sector to grow its client base despite a very favourable underlying environment. The fact is that many wealth management firms completely overlook the importance of marketing. Indeed, many firms boast that they don't really do marketing. Instead, they rely upon their clients to spread the word.
This appears to be confirmed by ComPeer's data. Marketing spend fell between 2002 and 2005 in both absolute terms and as a proportion of revenues.
In 2002 the firms surveyed by Compeer spent £28.13 million on marketing, or around 1.6 percent of revenues. But in 2005 this had fallen to £27.97 million, or 1.2 percent of revenues.
"The level of external marketing costs remains extremely low at only just over 1 percent of revenues at only just over 1 percent of revenue and has shown an absolute decline from 2002," ComPeer concludes.
Indeed marketing costs come well behind "Premises and Facilities" (9.4 percent), IT and Information Services (8.0 percent), "Staff Expenses, which includes "recruitment fees, agency charges for temporary staff, training, travel, staff and client entertainment, subscriptions and other generall staff expenses" (3.0 percent), and Professional Fees (2.6 percent) as a proportion of revenues.
Of course wealth management firms could argue that the current more benign environment means that firms don't have to market as much as they did in 2002. New wealthy clients can just walk through the door of their own volition. Except of this course this just is not true.
More to the point does anyone know of any other service-related sector that spends less on marketing as a proportion of revenues?
Looking at non-staff costs generally ComPeer found that they fell from 35 percent of revenue in 2002 to 28 percent in 2005. In absolute terms, however, they increased by 10 percent from £212.6 million in 2002 to £221.77 million in 2005.