Fund Groups’ Ad Budgets Grew 50% in ’96 to All-Time High

U.S. mutual fund companies boosted their advertising spending by about 50% in 1996 to an estimated all-time high of $300 million, according to an industry research group.

The spending increase easily exceeds the 20% rise in industry assets to the $3.39-trillion level for the first 10 months of the year.

“While a causal connection can’t be made between asset growth and ad spending, the industry depends on building brand recognition, and advertising is clearly a way to achieve that,” said Geoff Bobroff, an independent industry consultant in East Greenwich, R.I.

This year, mutual fund inflows are running at a record rate. Investors appear to need little convincing to put their money in funds.

But with more than 7,000 funds available to U.S. investors, fund groups need to differentiate themselves more than ever.

“You can’t determine what will stimulate a sale,” Bobroff said. “The key is brand awareness.”

Mutual fund ad spending totaled $234.8 million in the first nine months of the year, up 63% from $144.4 million in same period of 1995--and ad spending tends to be highest in the fourth quarter, according to Competitrack Inc., a marketing firm that follows the financial services industry.

If historic trends persist, advertising spending in the fund industry will reach at least $300 million this year, said John Jelilian, senior vice president of Competitrack. In contrast, mutual fund ad spending was $212.3 million in 1994 and $201.5 million in ’95.

Fidelity Investments, American Express, T. Rowe Price Associates and Zurich Kemper Investments are among the companies using “high-profile” mutual fund ad campaigns in 1996, Jelilian said. So are companies such as New England Funds and John Hancock Mutual Life Insurance.

Fidelity, the No. 1 U.S. fund group, made the biggest splash this year with a national television ad campaign designed to increase the awareness of the firm’s funds and discount brokerage firm. The new ads premiered last spring during broadcasts of the NCAA basketball tournament, and they’re still running.

John Hancock kicked off a $16-million national ad campaign earlier this year that it’s calling “Insurance for the Unexpected. Investments for the Opportunities.”

The goal is to broaden consumers’ perceptions about John Hancock, said Steven Burgay, an advertising executive at the Boston-based company. “We want consumers to know we provide insurance as well as investment products.”

John Hancock’s research indicates consumers are getting the message, Burgay said. “The ad campaign is going to continue into 1997 and beyond,” he said.