By Richard Keary and Justin Meise, co-founders of ETF BILD | July 16, 2020
The ETF industry was built on a spirit of innovation – and in the time of COVID, ETF leaders are once again proving how adept the industry is at developing new solutions to challenges … and challenges there are aplenty. Despite the great technology and thought leadership platforms many firms have leveraged for years, sales remains a high touch, very personal process. So how are ETF firms large and small engaging with clients and – even harder – forging new relationships in an environment where very few people are traveling, conferences are on hold and a paucity of people are ready to meet in person anytime soon? We sought out a range of industry experts to tackle these questions. As discussed below, ETF firms are adapting their approaches to their clients and attracting new clients by re-emphasizing sales fundamentals and taking advantage of new or previously underutilized technologies to deliver high quality content tailored to the needs of their clients.
ETF firms have substantially ramped up their digital engagement. In fact, one firm we spoke with indicates that sales meetings online or via conference calls pre- COVID were a few hundred a month and post-COVID are in the thousands. A pervasive theme from ETF shops is that COVID didn’t spark a sudden digital transformation, which had begun years before, but that it has greatly accelerated the digital trend. Two examples of trends that have been accelerated are ETF firms shifting to using more technology tools for engagement and recruiting for professionals with stronger digital skills.
“We didn’t change strategy, we changed tactics,” said Susan Thompson, EVP and Head of Americas Distribution for SPDR ETFs at State Street Global Advisors, an ETF provider that has seen strong flows during the pandemic. Thompson said that all of their teams have been working from home since mid-March- a move she describes as seamless. “We’re finding people are very productive at home,” she says, adding, “Clients have begun to enjoy the webinar style setup – we’ll continue to see more of that.”
Ed Rosenberg, SVP and Head of Exchange Traded Funds at American Century, agrees, adding: “We were already doing conference calls and webinars throughout, and I don’t think the meetings themselves have changed or the pace of the meetings. What has changed is the interaction space – instead of having live meetings, we have ramped up and replaced them with virtual meetings.”
New efficiencies in the sales process has been an unexpected and welcomed benefit from COVID. Jillian DelSignore, Principal at Lakefront Advisory, points out that virtual teams are doing more meetings due to the simple efficiency of eliminating travel as well as smarter targeting. As the virtual sales process has risen in importance, it re-emphasized the need by ETF firms for more and better quality of data. “Data from a host of different sources including home offices is like gold,” she says, citing the ability to approach an advisor with a product you know will be relevant. “Data makes you a more informed salesperson and therefore a more valued partner.”
State Street’s investment in data science and data scientists has paid off. According to Thompson, State Street data scientists closely examine actions and derive conclusions, which ultimately enhances lead scoring. “We are getting past what the advisors are saying and getting to what they actually want, and it has increased our win rate substantially.”
Pre- and post COVID, having a great story and a message that resonates is a critical starting point for ETF firms. While this has always been true, financial advisors who use ETF products appear to be looking for more thoughtful discussions in virtual interactions that add value to their business. Rosenberg points out that, “If you’re known as the guy who just parties and takes people out to a hockey game or a really nice dinner – there’s not much value there. If that’s how you built your relationships in the past and that’s what your reputation is, it’s going to be really hard for you to build anything in this environment today.” Conversely, he suggests that if a salesperson has built the relationship on credibility, providing insights or information that helps advisors solve a client problem and grow, then fighting for time in this environment won’t be that difficult.
Having a story to tell is especially true for distribution efforts at smaller shops, which do not have the benefit of a well-recognized brand. Andrew Chanin, co-founder and CEO of Procure, which recently launched the UFO ETF, advises that smaller, thematic shops need to find ways to plug into trending topics to be relevant. “This summer, we’ll be doing more webinars with thought leaders in the space industry and not just talking about UFO or what the space industry is doing, but also showing how relevant space is to our everyday lives.” He points out the excitement around the Space X launch and the role space has played during the pandemic through technology like 5G which is delivered by satellite.
Of course, firms do not always have a product that is timely or one that captures investors’ imaginations. Many great products are complex, laden with financial jargon. For those products, sales teams need to simplify the story. DelSignore says that “the most successful products are often the ones with the simplest stories, which can be easier for the sales team to sell. The story can be more memorable for the financial advisor.” She adds, “ideally, you need to sum up three main points that can be delivered in a 30 second elevator pitch. If you can’t, it can be a problem for commercialization.”
Transforming ETF distribution by relying more on technology, data and content is not a new theme in the industry. As we listened to the professionals on the front lines, their description and solutions for the challenges of relationship building and prospecting have been heard before; content is king, technology will drive it, clients want a clear and concise story. The difference in these conversations is the urgency to make these changes. Prior to COVID, there was an evolutionary process in place. Now, it is all hands-on deck to innovate and create the change needed to move the industry forward through the COVID crisis.