Branding and the JOBS Act: What Does it Mean for You?

What is Your Brand?

Brand Positioning: Many people believe a brand is the sum of a few elements – a logo, a slogan, chosen colors and designated fonts. In reality, it is more complicated than that: a brand is the emotional and psychological relationship you have with your investors and potential investors. A brand serves as a ‘corporate image’ and the foundation of all marketing activities. Strong brands elicit opinions, emotions, and sometimes even physiological responses. The core concept behind a corporate image is that everything the firm does, every strategy it manages, and every investment solution it provides should reflect the values of the leadership team and of the firm as a whole. A leading institutional asset management firm’s brand frames this core concept consistently, solidifying what it stands for, what it believes in and why it exists.

The Situation

The JOBS Act: Recently, the Securities and Exchange Commission (SEC) voted 4-1 to lift the ban on general solicitation and advertising for Rule 506 offerings (i.e., private funds). This creates an opportunity for both established and emerging managers to strengthen their brand and to create more effective, ongoing channels of public communication. Initial key areas to explore here include a more comprehensive website, online Search Engine Optimization (SEO), speaking engagements, event sponsorship, published articles in leading publications and select social media.

How Should You Proceed? The choice is yours.You may choose to continue marketing the way you always have, soliciting only accredited investors with whom you have an existing relationship; in that case, your verification process and filing requirements will remain virtually the same. But if you choose to capitalize on the regulation change, you have some time to prepare a strategy and materials (the changes go into effect 60 days after the ruling is published in the Federal Register).Marketing to a considerably larger audience presents an opportunity. However, it also comes with an additional administrative burden. Before you make a decision, you need to understand the trade-off.

The Rules

Verifying Status: A Fund must ensure that only accredited investors invest in exempted offerings, and the process for verifying eligibility has become more stringent.Client representations in the form of a tickbox are history. You will now be required to review an acceptable IRS form that states an investor’s income and to obtain written representation confirming the accredited investor’s status.Many funds will probably pass this work on to their administrators or other third parties, who are already priming themselves for the additional duties – often for additional fees.

Soft Circling Investors: For private funds conducting general solicitations, Form D (“Blue Sky”) will now have to be filed at least fifteen days prior to fundraising in a given jurisdiction as opposed to the current practice of filing following an investment. For start-up funds looking to ‘soft circle’ seed investments, this means filing before you approach your initial prospects.It pays to be vigilant: those filing late will incur the heavy penalty of being barred from soliciting for a year under either the new or the old practices.

Transparency: In addition, for the next two years – and possibly longer – funds will be required to file examples of all marketing materials (print and online) electronically with the SEC.All advertising will need to include SEC-approved ‘legends’ or footnotes stating that investments may only be made by accredited investors. This is similar to the process for mutual funds.

Next Steps

Now, About that Aforementioned Opportunity: While forward-thinking managers will want to embrace these new opportunities, proceeding with caution will pay off over the long term. We recommend taking a thoughtful, deliberate approach to developing and expanding new marketing strategies in order to maintain consistency and to enhance your identity across media.

The Fundamentals

Why is an institutional brand so important? The first stone set in the construction of a solid structure is the cornerstone. It is the most important piece of any masonry structure because all other stones will be set in reference to this stone. Externally, your brand serves as the cornerstone of your customer’s experience of who you are; internally, it serves as the touchstone for developing your marketing strategy and strategic business plans.All decisions, not just marketing, should be made in alignment with your brand.

Key Areas of Opportunity

Website and Online Presence: Your website is a major asset that can reinforce your brand, inform and attract. Currently, most private funds’ websites act like a wall, keeping visitors out; under the new rules, they can serve as a front door, welcoming visitors in. Prospects want to know who you are, what you do and how you do it. You will now be able to share substantive information about your firm’s history and philosophy, the background of key people, and your offerings. This has the potential to humanize what has historically been an esoteric, niche investment area. What about performance data? While the SEC has indicated that performance may be shared if accompanied by proper disclosures, there is a downside to showing performance on the public area of your website. This can have the effect of commoditizing your offerings and downplaying the importance of your key strengths. One option would be to include a range of meaningful high level statistics on your website, rather than detailed performance, with further information available upon request (or via login), giving you an opportunity to engage the prospect. Finally, when thinking about the web, remember to include SEO as part of your strategy. SEO and Online Reputation Management are important to actively manage irrespective of your marketing strategy.

Sponsorship of Events: This can help a firm position itself with its target audience.Now that this option will be available, it’s time to consider who your target audience is and where they spend their time.Are your potential investors more likely to be found at PGA tour events or at the Kentucky Derby? Before you allocate a potentially substantial portion of your marketing budget to an event or series of events, be sure that it will elevate your brand and positively reinforce your identity.

Speaking Engagements/Media: Speaking engagements can provide an opportunity for education and for thought leadership, serving as an excellent medium for managers who are capable of engaging an audience.This is not for everyone. We’ve all had the experience of being at a conference, listening to a panel of speakers turn what might have been an interesting subject dry. On the other hand, many of us have also experienced hearing a leader in the space bring a subject to life or make something very complex seem very clear. That type of speaker, who can engage a targeted audience, is a real asset. After an engagement, links to presentations or interviews can be reposted on the firm website and in other media, and play a key role in reinforcing a brand. Hedge fund managers already offering (or who are interested in offering) mutual fund/40 Act vehicles to retail investors can especially benefit from this strategy.

Social Media: Social media will become a more common tool over time in order to attract new generations of young wealthy investors and rising entrepreneurs. Strategic use of social and traditional media may be used to present a strong corporate identity and brand to a growing audience.When used effectively as marketing tools, businesses can communicate with existing and prospective customers over many media simultaneously, reinforcing brand recognition.The key in this case is to keep the message and the medium high-caliber in order not to ‘cheapen’ your brand.

Messaging: The importance of messaging cannot be underestimated. The right core messaging can help guide and position your firm, whether you are a start-up or an established institutional manager.Public perception is critical to building your identity, creating name recognition and protecting brand ‘equity’.

Public Relations: Strategic interactions with the established media, whether educating about the industry as a whole or about your firm, can build a strong foundation that will serve your firm for years to come. Being featured in the press, or in a leading publication, is a way to reinforce thought leadership and reach a broader audience while building your brand in a positive way.

In Conclusion

The recent ruling has opened the door to a wide range of opportunities to reach a broader audience. The suggestions above represent fairly simple and straightforward first steps; with time, more wide-ranging options will become standard, as the successes and failures of first movers play out. The bottom line is that for the benefits to be significant and enduring, any changes to a firm’s marketing approach should be taken in the context of a well-thought out, strategic campaign that develops and enhances brand recognition and identity.

Helping Clients Achieve Creative Alpha.Lauren Colonna is Founder and Principal of Ovis Creative, a full-service, strategic marketing communications design firm dedicated to the unique needs of the financial services industry. Ovis offers customized print and online solutions for marketing complex financial products and services to sophisticated investors. For more information, please contact us at [email protected] or at 212.545.7254.