American Funds: Call Me

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Like a lot of people in my business, I have Bloomberg TV and CNBC on all day in my office. I like the ads almost as much as I like the stories.

The ads interest me because I can see, or think I can see, the marketing strategy behind it.

At the moment, American Funds, a prolific advertiser, is running and ad that makes my Spidey sense tingle.

The tingling comes from the voice over which says something like this proven, unique approach has resulted in a superior long term track record.

Could it? My experience on the marketing end of financial services is that even facts which are true can’t be said for fear of blowback. And here’s a fact American Funds is broadcasting to the world that would be very difficult to be true in absolute terms.

It turned out I was right. Their long term results – 10 years, that’s long, right? – are not superior, at least based on the research I did.   For instance their Capital Income Builder fund posted a 10 year return of 4.65%. It’s benchmark, the S&P 500 10 year return is 5.58%. Same with the American High-Income Trust®. Ten year return: 5.05%, benchmark: 7.65%. (Return figures as of November 9, 2015.)

There are American Funds producing superior results. Of the four funds I looked at, two beat their benchmarks, and two did not. But for the “superior results” statement to be true, all of their funds need to beat their benchmarks, at least as this kind of thing gets explained to me by legions of securities counsel who seem to worry about everything.

American Funds, owned by Capital Group, is a large firm with a venerable past. I don’t think misleading investors is part of their plan or even remotely on their minds. I believe they are simply being aggressive and trying to stand out in a cluttered environment. And I say bully for them.

However, I would add that if you are going to go out on a limb, the story line should be compelling enough to justify the risk. And believe you me, there is nothing compelling about a “unique” approach.

Here’s evidence: When we’re on the phone with journalists and producers pitching stories, the surest way kill their interest is suggesting the company we are shilling has a unique, proprietary or differentiated product or service. It’s a death knell. Game over.

Seems odd, but after you’ve heard, “Unique? We don’t do unique,” and a click, it sinks in. Further, journalists don’t have the time to figure out if something is maybe, perhaps, just possibly, unique.

What do journalists know? That unique does not sell papers. If it can’t sell newspapers, it probably won’t sell a mutual fund.

So why is American Funds pitching themselves this way? I don’t know, but if they want to call, I have a few good ideas to help them to break through the clutter and generate more leads.