Newspaper article THE JOURNAL RECORD

Competition Spurs Mutual Funds to Double Their Ad Budgets

Newspaper article THE JOURNAL RECORD

Competition Spurs Mutual Funds to Double Their Ad Budgets

Article excerpt

BOSTON -- U.S. mutual fund companies boosted their advertising spending by about 50 percent in 1996 to an estimated all-time high of $300 million, according to an industry research group.

The increase in ad spending easily exceeds the 20 percent rise in industry assets to the $3.39 trillion level in the first 10 months of the year.

"While a causal connection can't be made between asset growth and ad spending, the industry depends on building brand recognition and advertising is clearly a way to achieve that," said Geoff Bobroff, an independent industry consultant in East Greenwich, R.I. This year, mutual fund inflows are running at a record rate. So why are fund companies spending so much at a time when investors appear to need little convincing to put their money in funds in the first place. With more than 7,000 funds available to U.S. investors, each fund group needs more than ever to differentiate itself and help it stand out from the pack. It's become not much different from selling soap, toothpaste or cigarettes. "You can't determine what will stimulate a sale," Bobroff said. "The key is brand awareness." Mutual fund ad spending totaled $234.8 million in the first nine months of this year, up 63 percent from $144.4 million in same period of 1995, and ad spending tends to be the highest in the fourth quarter, according to Competitrack Inc., a marketing firm that follows the financial services industry. If historic trends persist, advertising spending in the fund industry will reach at least $300 million this year, said John Jelilian, senior vice president of Competitrack. In contrast, mutual fund ad spending was $212.3 million in 1994 and $201.5 million in 1995. Fidelity Investments, American Express Co., T. Rowe Price Associates and Zurich Kemper Investments are among the companies using "high-profile" mutual fund ad campaigns in 1996, Jelilian said. So are companies such as New England Funds LP and John Hancock Mutual Life Insurance Co. …

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