Responding to advisers who complain that the iShares brand means little to their clients,
Barclays Global Investors is modifying its marketing.
In addition to promotional efforts aimed at advisers, the San Francisco-based investment firm has begun to push its exchange traded funds to high-net-worth investors through an advertising campaign using television, radio, outdoor and print, as well as the Internet.
This month, for example,
Barclays is placing iShares ads in upscale publications such as Wine Spectator, Travel and Leisure, The Economist and Golf Digest, said Andrew Arenberg, managing director of channel marketing at the firm.
The new tack comes at a time when more well-known investment firms are entering the ETF marketplace and chipping away at
Barclays' dominance. The giant saw its market share slip to 53% at the end of 2007, from 57% at the end of 2006.
"They must be feeling the pressure to grow, and it's a very expensive proposition," said Timothy Welsh, president of Nexus Strategy LLC of Larkspur, Calif.
But Barclays' new marketing campaign is not a response to market share statistics, according to Lee Kranefuss, chief executive of Barclays' intermediary and ETF business.
Market share figures for exchange traded funds are misleading because assets in the largest and most actively traded ETF — Boston-based
State Street Global Advisors' SPDR S&P 500 fund — fluctuate so widely, he said.
HIGHER PROFILE
Advisers have applauded Barclays' marketing efforts, and hope that a higher profile will also streamline client interactions, Mr. Kranefuss said.
He said that advisers have told him they are spending too much time explaining iShares, ETFs and Barclays "instead of [handling] portfolio issues."
The new ads — all with the tagline "Let's build a better investment world" — urge the affluent to buy iShares and to establish a relationship with an adviser.
One ad sports a photo of a pampered toy-breed dog peeking out of a trendy designer handbag.
"You can listen to the hype, trends or the one person who's going to help get you past all that," the text reads.
Another ad is illustrated with a crumpled $50 bill.
"Are you underdiversified and overtaxed?" the copy reads. "Would you know it even if you were? It might be time to call your adviser."
But some advisers wonder how these ads will affect their clients and prospects.
"I haven't had an extra conversation about iShares for a couple years now with a quasi-sophisticated high-net-worth investor," said Kim Arthur, president of Main Management LLC of San Francisco, which manages $250 million.
John Sullivan, principal of Portland (Maine) Global Advisors LLC, which manages $275 million, said he does not see the value in Barclays' new marketing focus.
"Once [clients] buy into indexing, they don't care how we solve the problem," he said.
But these ads are a big plus for Barclays, according to two advisers, both of whom were referred to
InvestmentNews by the firm.
"I'm giving them a standing ovation," said Robert Siefert, principal of Boston-based Back Bay Financial Group Inc., which manages $380 million. "This really gives us ammunition."
It also eliminates brand confusion, said Jay Wertz, director of wealth advisory services for Cin-cinnati-based Johnson Investment Counsel Inc., which manages $4 billion.
"I meet with a lot of sophisticated investors, and they don't realize iShares is a brand of ETF," he said.
Barclays spent $16 million on advertising in 2007, according to Competitrack Inc. of New York.
Although Barclays declined to disclose its budget for the new campaign, it typically raises its advertising spending by 30% annually, according to spokeswoman Christine Hudacko.
COMPETING BRAND NAMES
The campaign builds on a strategy launched by Barclays last spring, when it began to sponsor the U.S. tour of Cirque du Soleil and a series of yachting races in which the boats have "iShares" splashed across the sails. The amount spent on these sponsorships was not included in the advertising budget.
But there's no guarantee that big spending on iShares advertising to individuals will translate into sales anytime soon, Mr. Welsh said.
"The challenge for Barclays is that even the high-net-worth in-vestor doesn't know what an ETF is," he said. "Can [Barclays] really move the needle ... when everyone on the planet is trying to do the same thing?"
Barclays needs to concern itself with competitors whose brand names are better known to investors than iShares, said Tom Lydon, editor of etftrends.com, a news website from Global Trends Investments of Newport Beach, Calif.
"Not far down the road, we'll see
T. Rowe Price [Group Inc. of Baltimore] and Fidelity [Investments of Boston]" go aggressively after the ETF market. Fidelity currently has a single ETF that had $80 million of assets at the end of March.
Fidelity spent $262 million on advertising in 2007, and T. Rowe spent $62 million.
Time will tell, Mr. Kranefuss said.
"It takes at least six months to see needles move," he said. "The first needle is adviser awareness. The second needle is advisee awareness."
Barclays has plenty of catching up to do, Martha Papariello, principal of advisory services at
The Vanguard Group Inc. of Malvern, Pa., said in an earlier
InvestmentNews interview.
"Consumers haven't heard of Barclays," she said. "We clearly have the advantage."
Mr. Arenberg responded to her comments graciously.
"Vanguard is a great competitor, and they've invested an incredible amount of money in building a great brand," he said.
Vanguard spent $27 million on advertising in 2007, according to Competitrack.
E-mail Brooke Southall at [email protected].
