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Will Marketing & Client Relations (MCR) knowledge of local marketing regulations contribute to an effective sales pitch?
Since 2006, Global Sales Compliance (GSC) has worked closely with AIFM/Asset Manager marketing teams to ensure compliance with cross-border marketing rules.
Over the past nearly two decades of cross-border marketing compliance advisory, we have observed a trend in investor attitudes toward the fund manager’s compliance with local regulations, especially regulated institutional investors such as banks, insurance companies, pension funds and sovereign wealth funds who would invest in the products and services of AIFMs/Asset Managers.
In this blog, we ask CEO Cathy Brand to share real-time observations about investor attitudes toward marketing compliance by the sales teams (MCR) of AIFMs/Asset Managers as well as practical implications for cross-border fundraising from regulated institutional clients.
Q (Jennifer Howze): Do investors care about marketing compliance by AIFMs/Asset Managers?
A (CEO Cathy Brand): Yes. Moreso than ever.
We have been tracking the development life cycle of marketing regulations in 70+ countries for over two decades and working closely with AIFM/Asset Manager sales teams. As a result, we have gleaned feedback from Marketing & Client relations (MCR) teams on their experiences while marketing alternative investment funds to regulated investors worldwide.
If we go back to the late 1990s and early 2000s (over 2 decades ago), one could observe that regulated institutional investors’ fundamental concern was seeking “alpha”, searching for investment managers (typically outside their own jurisdiction) who could provide alternative investment solutions that not only boosted the performance of the investor’s total portfolio but also provide diversification through low correlation to traditional investments.
During this time period, many countries’ private placement regulations were evolving in terms of the life cycle of development. The sales practice of “flying below the radar” by AIFM/Asset Management sales teams -- in order to try and avoid “triggering” local marketing regulations -- was not uncommon. Whether the AIFM/Asset Manager complied with the local marketing regulations in the institutional investor’s jurisdiction was of lesser (or secondary) concern to the investor, who was primarily focused on seeking portfolio alpha and diversification.
We have observed a growing trend by regulated institutional investors who actually care about and place a value on whether the AIFM/Asset Manager selling the alternative investment fund to them is compliant with the investor’s local marketing regulations. Regulated institutional investors are subject to their own internal investment policies and strict governance programs which set standards for investing with solid, compliant and regulated fund managers.
Q (JH): Do investors know their own local marketing regulations, and will they catch you out if sales teams (MCR) are in breach of the investor’s country marketing regulations?
A (CEO): Yes. Investors are well aware of their own local jurisdiction’s laws and regulations on marketing alternative investment products & services to them. If you are pitching financial products or services to investors in overseas jurisdictions, be prepared to field questions from the investors (offerees) about your compliance with their own country marketing regulations.
We provide two “real life” examples of MCR experience from industry feedback, marketing alternative investment funds to investors in Saudi Arabia and Japan.
- The Kingdom of Saudi Arabia: In one instance, MCR teams from the UK flew to Saudi Arabia to pitch their alternative investment funds to a Government Entity in Saudi Arabia. During the meeting held in KSA, the potential investor started the meeting by asking the salespersons (MCR):
Investor: “How are you legally here in my country (Saudi Arabia) to solicit this alternative investment fund to us? What is your understanding of our country’s marketing regulations and how are you complying with these regulations?”
MCR: It is unclear what the response was to this investor request but if MCR’s answer to the investor’s question above is, “We don’t know”, this is the wrong answer.
Not a very effective sales technique.
- Japan: In repeated situations, we have observed both in RFPs by Japan institutional investors to AIFM/Asset Managers as well as in the general marketing process that Japan investors want specific details on the AIFM/Asset Manager’s compliance with Japan’s regulations. This includes the type of filings/fund registrations made by the manager as well as their compliance with Japan FSA’s licensing regulations.
During pitches to Japan regulated institutional investors, be prepared to cite the name of Japan’s fund, securities and licensing regulations and your compliance thereto.
Q (JH): Is marketing compliance knowledge by MCR teams a powerful sales tool?
A (CEO): Yes. Moreso than ever.
The “Cowboy Marketing Days” of “flying under the radar”, believing this marketing technique was a regulatory carve-out from local marketing regulations, are over by well over two decades.
Regulated institutional investors want to know that MCR and sales teams are not only informed of the investor’s country marketing regulations but are compliant with these regulations. It’s a matter of respect for the investor’s laws. Investors want to know that AIFM/Asset Managers have a clean regulatory record and a respect for compliance, moving away from the financial scandals of the past.
If MCR has a basic knowledge of your target investor’s local country marketing regulations, this is a powerful and impressive sales tool that will put your pitch ahead of the competition.
Effective Sales Road Map© training can get you there.
Read our blog: Cross-Border Marketing Compliance: What you Need to Know
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