Marketing Strategies for Mutual Funds

Mutual funds are baskets of stocks that are actively managed by a professional investor. You can choose from more than 10,000 funds from the United States. Large fund companies such as Charles Schwab, Fidelity and Vanguard offer these funds to individuals using a number of different marketing strategies. In fact, Fidelity has been so successful that it has surpassed $1 trillion in assets under management.

The most common sales and marketing strategies for mutual funds is to sign-up companies as a preferred option for their retirement plans. This provides a simple way to sign-up numerous accounts with one master contract. To market to these firms, sales people target human resource professionals. Marketing occurs through traditional business-to-business marketing techniques including conferences, niche advertising and professional organizations. For business accounts, fund representatives will stress ease of use and compatibility with the company's present systems.

Consumer marketing of mutual funds is similar to the way other financial products are sold. Marketers emphasize safety, reliability and performance. In addition, they may provide information on their diversity of choices, ease of use and low costs. Marketers try to access all segments of the population. They use broad marketing platforms such as television, newspapers and the internet. Marketers especially focus on financially oriented media such as CNBC television and Businessweek magazine.

Mutual funds must be very careful about how they market their performance, as this is heavily regulated. Mutual funds must market their short, medium and long-term average returns to give the prospective investor a good idea of the actual performance. For example, most funds did very well during the housing boom. However, if the bear market that followed is included, performance looks much more average. Funds may also have had different managers with different performance records working on the same funds, making it hard to judge them.

Mutual funds must be very clear about their fees and report them in all of their marketing materials. The main types of fees include the sales fee (load) and the management fee. The load is an upfront charge that a mutual fund charges as soon as the investment is made. The management fee is a percentage of assets each year, usually 1 to 2 percent.