Summary Prospectus - to Partner or Not To Partner?

Recently I’ve been doing quite a bit of research into the potential impact of the SEC’s Summary Prospectus Rule on financial firms and financial printers. While this issue is clearly top of mind for financial industry associations such as the ICI and NAVA, I was surprised to find that it was not on the radar at all for print-centric organizations such as NAPL, NPES, PRIMIR and Xplor. Then it occurred to me how concentrated the traditional offset prospectus printing business had become. A very small group of very large printers control the market, and the rest of the crowd has stopped competing for it. With the advent of the summary prospectus, and the trend toward digital printing, a good chunk of that market may be up for grabs and the big players are shoring up, or partnering up with their offers to hang on to their clients. For example:

In March, Bowne entered into a strategic alliance with Firehouse Financial Communications LLC ("Firehouse"), a Massachusetts-based document simplification firm. Firehouse's design and content capabilities have been integrated with Bowne's content management system and robust composition network and marketed as the the Bowne Firehouse Summary System for Summary Prospectus.

Also in March, Broadridge expanded their long-time partnership with NewRiver by signing an exclusive agreement to offer NewRiver’s Prospectus Express and Virtual Document Warehouse products for pre-sales and first-dollar prospectus deliveries in the brokerage market. With Prospectus Express, Broadridge can offer a solution that not only makes the summary prospectus available online, but also links directly to the statutory prospectus in support of the SEC’s requirement for layered disclosure. Virtual Document Warehouse (VDW), the companion product, provides a comprehensive library of print-ready summary prospectuses (via PDF) with links to the corresponding statutory prospectus. Using VDW, Broadridge will be able to fulfill first-dollar delivery requests using print-on-demand rather than traditional pick and pack processes, thereby creating efficiencies for investment companies and brokers. NewRiver has also started tracking the funds implementing stand along summary prospectus in their Summary Prospectus Index which can be found at http://tinyurl.com/mc37o2

In May, Merrill Corp. another market giant in offset prospectus printing, announced a joint marketing agreement with Mobular Technologies to market Summary PRO AR, a new software application designed to meet the technical requirements of the rule for linking and web presentation. Summary PRO AR is built on the same technology platform as Mobular's Proxy Notice and Access solution.

In contrast, a firm not particularly known for prospectus printing, DST, announced in February their intent to “go it alone” with their “eProspectusDirect fully integrated, single-vendor solution,” offering printing and mailing of annual prospectus (using their Digital Press Technology inkjet printers versus traditional offset), first-dollar fulfillment combining the prospectus with the confirmation mailing, electronic delivery and Internet hosting of compliance documents, and consent management services.

The summary prospectus rule, approved in January 2009, requires mutual funds to deliver a summary section in the statutory prospectus. Fund companies have the option to print and mail the full statutory prospectus to their shareholders or they can send only the 4 page summary prospectus document, as long as they post the statutory prospectus to the internet within 24 hours. The rule also requires cross referencing between the summary and the statutory prospectus and specific online navigation links. Shareholders who receive the summary prospectus must be able to easily request a printed copy of the full statutory prospectus and their order must be fulfilled within 5 days. The huge potential shift in print volume, investor website requirements and untested demand for follow-on statutory prospectus fulfillment means substantial change for mutual funds and financial printers alike.

So while the traditional players are trying to hang on to business and offer companion services, the rest of the industry should be assessing their own opportunities to shore up, partner up and maybe gobble up some of the shifting print volume and demand for enhanced online compliance solutions driven by these new requirements for layered disclosure. This will be an area of particular focus for the October Shareholder Communications Symposium.

Elizabeth

www.linkedin.com/in/egooding

House Bill affecting Retirement Plan Participant Reporting

This week, the US House of Representatives subcommittee on Health, Employment, Labor and Pensions approved a bill that would require the Labor Department to impose penalties on retirement plan administrators that don’t fully disclose fees deducted from investors’ 401(k) accounts. The legislation would require that fees be broken down into four categories: administrative fees, investment management fees, transaction fees and “other charges.” The fees would also have to be “rolled up” into a single number for clarity.

Proponents suggest that the 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984) will help workers better evaluate their retirement options by requiring simple fee disclosure on the investment options contained in their employer’s 401(k) plan. Current law does not require all fees to be disclosed; and often the information can be difficult for workers to find and evaluate. Many 401(k) statements, for example have fees buried within other categories in the participant’s account summary. A practice I have advised retirement plan providers against for years. More at:

http://edlabor.house.gov/newsroom/2009/06/house-retirement-subcommittee.shtml

The committee also voted in facor of legistlatin that would allow independent financial advisers to provide investment advice to plan participants. The Conflicted Investment Advice Prohibition Act of 2009 (H.R. 1988) would restore federal safeguards that ensured that investment advice provided to workers on their employer-sponsored retirement plan be independent and free from any conflicts of interest. The investment-advice legislation would also allow an employee to receive investment information via a computer model. More at:

http://edlabor.house.gov/newsroom/2009/06/house-retirement-subcommittee-1.shtml

If passed, these regulations will have a fairly major impact on participant communications and require recordkeeping systems changes as well as design changes to 401k participant statements and reporting websites. Stay tuned!

Elizabeth

Transpromo Needs a Superhero - Part One

Transpromo is a concept that has been around for quite awhile, but like Superheroes, the concept has seen a surge in popularity and profit potential in 2008/2009. While gaining ground, there are still many hurdles to be overcome in the market at large and for individual solution implementers. Perhaps we need our own Superhero to rally around:

Who turns mundane business documents into personalized communications that have the lure of a siren’s song? Who cleanses data with a single laser beam stare?
Who knows exactly the right message to send and just how and when to send it?
Who leaps Transpromo hurdles in single bound?

The Transpromonater does. Yes, the Transpromonater– a superhero dedicated to stamping out junk-mail and delivering customer enlightenment one mailbox at a time.

If you’re not a superhero, or secretly are, but find yourself stuck in an office with some corporate kryptonite, you’re going to have to leap the Transpromo hurdles the old fashioned way – by focusing on people, processes and technology. Believe me; you won’t do it in a single bound. A successful Transpromo initiative will require a series of carefully orchestrated steps. A secret Transpromo decoder ring would be nice too, but you will most certainly need that tool of heroes and villains alike: the Master Plan.

To create a Transpromo Master Plan your organization needs to really understand what makes your customers tick and what drives behaviors like buying more products and services, recommending products to others, using self-service tools, or going over to your competition. This is just some of the information you will want to have in order to drive relevant messaging on your communications in a way that customers will respond positively to.

You also need to be an internal evangelist to help your organization understand what Transpromo is and how it can help your business. With all the hype on the topic, it would be easy to jump too soon and trip on your cape. For example, if your only mandate is to use Transpromo to sell something on your statements or invoices – you’re missing the big picture. Your transaction documents are just one of many channels for serving, and communicating with, your customers. Transpromo campaigns must work in concert with other customer communication vehicles.

Research from Forrester, TAWPI, Corporate Insight, Bancography and others suggests that starting your messaging in a way designed to serve rather than sell will give you better long term results. Several of these firms also note that consumers react differently to messages on their retail credit card or phone bill than they do on their investment or insurance communications. There are very few case studies available that provide measurable results for Transpromo initiatives. That means that you will most likely need to conduct your own research and refine your strategy based on ongoing measurement and feedback. There’s no better way to learn customer preferences than to ask them what they want and then observe their behavior when you give it to them.

Ultimately, your master plan should consider relevant messaging, on-statement advertising, coupons and personalized URLs (PURLs or CURLs). While relevant messaging is always, well – relevant, not all of the other components may be suitable to your situation. Analysis of your customer segments, customer behaviors at different points in the relationship life-cycle and the key behaviors you need to influence is critical. Further, what are the results that you hope to achieve from the behaviors you intend to influence? Are you expecting to increase sales, reduce customer churn, decrease servicing costs, gather more customer referrals or all of the above? What will it cost to achieve these results? What will your return on investment be? Do you have the internal benchmarks necessary to make your case? Do you have the resources to follow up if customers respond to your offer?

Wow - that's a lot of questions. But they need to be asked. That's all for today. Stay tuned for some thoughts on "selling the concept" and more on the Transpromo Master Plan.