Assessing market potential of a new financial product

By Richard Smith

Our client, one of the largest investment managers in the UK asked us to speak to intermediaries (financial advisers and wealth managers) to establish the potential in the market for a new fund.

Whilst it is possible to categorise financial intermediaries based on their clients, services and activities, to an extent every firm of financial advisers and wealth managers operates a slightly different business model.

  • Some do most of their own research in-house; others outsource.
  • The client facing adviser may also be the analyst who decides which funds are on a panel of recommended funds. In another firm, this role would be devolved.
  • Some intermediaries want to analyse the underlying constituent assets of a fund before making any judgment. For others, the name or names of a fund manager and the broad composition of a fund are sufficient to make a recommendation.

To add another layer of complexity, within the potential market for this new fund we also needed to speak to asset managers, fund of fund managers and very large national networks. These audiences have different needs and different ‘customers’ in mind when they are assessing a new fund.

The nature and the range of audiences involved (and the very limited numbers of such audiences) pointed to a qualitative approach, but our client had both a limited budget and a tight timeline. We advocated a small number of F2F depth interviews followed by a series of telephone depths, all conducted by the executive team. We recommended a teleconference on completion of the F2F element and a workshop style presentation on completion of the tele-depths.

One aspect of our approach which differentiates us from some of the specialist investment researchers also used by our client is that whilst we do have quite a lot of experience in talking to intermediaries of this type, we always ensure that we make no claims to intermediary level expertise when talking with this audience. We always make it clear that they (the intermediaries) are the experts and that we are there to listen and understand.

  • This gives us permission to ask ‘stupid / naive questions’, which can often elicit interesting answers. For instance, in this study we were able to explore the rationale for income funds, which we discovered often has little to do with generating income per se. (one senior internal client found this fascinating).
  • We also find that in the process of describing their thoughts, attitudes and assumptions in layman’s terms, intermediaries provide us with insights that are of far greater value to our client than some of the conversations that their own sales staff have, which tend to be more technical and mechanical. It highlighted some serious gaps in knowledge around the mechanics of derivatives, which may have been glossed over in a more technical discussion.

When we met up for the workshop debrief with our insight client and some senior colleagues, we provided them with a balanced view of whether to proceed with the new fund and told them that, in our view, it could launch successfully but only as a niche product. In the end they decided that it was probably not suitable for the UK market and therefore not worth the considerable investment involved in launching. Whilst this might sound like a bit of a damp squib, our clients were delighted as actually we had provided evidence that now was not the right time to take the product to the market.