Marketing: Still the Cinderella at UK wealth management firms? - 30.07.2009
Wealthnet
Definitional problems are an endemic feature of the wealth management sector. Take marketing, for example.
In many other sectors, marketing is a discrete activity and is treated accordingly in the accounts. But this is not the case in the wealth management sector. Here many firms will contend that marketing is just one of the many functions carried out by relationship managers. As a consequence, any analysis on marketing spend will almost certainly underestimate the money that is actually spent on marketing a wealth management firm’s products and services.
The analysis contained in ComPeer's annual report on the UK wealth management illustrates the conundrum. According to ComPeer marketing spend only accounted for £68.9 million, or 1.8 percent of total revenues earned by wealth management firms. This was a significant increase on the £63.77 million spent in 2007. But it still accounts for a very small proportion of total costs, and is probably much lower than in other service-orientated sectors.
At first sight this finding provides some support to the contention that at best the importance of marketing is just not understood at many UK wealth management firms, or at worst, almost ignored completely.
Nonetheless, "marketing spend" may not tell the whole story. There are also "staff expenses" and "staff costs" generally to take into consideration.
Staff expenses increased by 13.5 percent at UK wealth management firms according to ComPeer, from £131.20 million in 2007 to £148,85 million in 2009.
"This could be as a result of client facing professionals being increasingly active in travelling to see and entertaining new and existing clients, or even an example of the financial impact of the Treat Tour Customers Fairly (TCF) regime," says ComPeer.
This sounds like marketing-related activity to this writer. Should it be treated accordingly? If "staff expenses" is treated as an adjunct of marketing then this would boost marketing spend by another 4.00 percent as a proportion of total revenues.
Then there are staff costs generally to put into the equation. Sales-related costs accounted for another £73.5 million during 2008, 5 percent less than in 2007.
Relationship management, which as previously mentioned is always assumed to encapsulate an element of marketing-related activity, accounted for £197.41 million of the £1.87 billion spent by UK wealth managers on staff costs generally. The only problem is, of course, that it is impossible to know how much of this figure to allocate to marketing.
Nonetheless, if all these extra elements are combined together the total spent on marketing-related activity may be much more than 1.8 percent of total revenues, as inferred from an initial perusal of the ComPeer data. So perhaps marketing is not quite the low profile activity it sometimes seems.
Even with these additions, however, marketing is still an “also ran” in the expenditure stakes. According to ComPeer investment management is the single most expensive activity at UK wealth management firms.
"Investment management staff consumed 30 percent of all wealth managers' staff costs in 2008, the costliest single department," it says. These costs fell by 3.2 percent in total. However, the average cost of an investment manager has fallen further to £115,000, down 5.2 percent on 2007 (£121,000).
ComPeer found that "other product specialists" (11.0 percent) and front office support/office takers (5.8 percent) accounted for the biggest cost increases sustained during 2008.