Loyalty of the Wealthy

Cogent Research LLC, a Cambridge, Mass, market research company surveyed 4000 mutual fund investors witha at least $100,000 in investable assets. The managing Director, Chris Brown indicated the the funds that are able to generate sufficient long-term returns build strong investor loyalty. Cogent used a scoring system that appears to be similar to NPS. The results of the survey indicated that the Vanguard Group led all others in investor loyalty. Their score was plus 44. The second company was Dodge & Wilcox with a score of plus 29. It should be noted that the average for the funds surveyed was minus 12.

The second factor that seemed to impact loyalty was the ability to communicate their investment philosophies to their end-users. The most important driver noted in the survey however, was consistency of fund performance.

One point of interest was that the average holding period for a stock mututal fund is about 3 years. A pure bond fund averages about 3.2 years.

Another point made is that while fund companies can attract new custoemrs with strong short-term records, they will lose the customers to more reliable long-term performers.

This market seems to focus on the product aspect of loyalty (recall the four loyalty attributes are product, process, relationship and reward - see previous blogs). The wealthy appear to be loyal to a "product" that performs well for them in the long run. Some would equate this type of loyalty to the loyalty of some auto buyers who continue to buy their car based on long-term performance.