Third Party Marketing Ban | State Agencies

Third Party Marketing Ban

Lately several state agencies have looked into and taken steps to ban the use of third party marketing firms presenting potential investment managers to them, this is because of the recent controversies surrounding politically connected kickbacks on investments made through these third party organizations. While this is a black mark for the third party marketing industry I do not see this as hurting business at all for the industry, I believe that third party marketing will continue to rapidly grow over the next 5-7 years as firms further evolve and focus more and more on the their competitive advantage which is usually their risk management and portfolio management techniques. Here is an excerpt one of the state agency third party marketing ban cases:

A state agency is banning the use of third-party marketing agents by firms trying to obtain investments from New Mexico’s $11 billion permanent funds.

The State Investment Council also voted Tuesday to ban certain campaign contributions by investment firms that have contracts with the agency. The contribution restrictions will apply to the firms as well as their principals, employees and their family members. source

Here is a public response from a third party marketing association on this matter:

The New York State Common Retirement Fund’s ban on the involvement of marketing intermediaries from the investment manager selection process and New York Attorney General Andrew M. Cuomo’s public pension code of conduct will have the unintended result of making marketing and sales practices less transparent and much more difficult to monitor. The restrictions will also serve to limit the ability of smaller and new firms to market to institutional investors as well as limiting worthwhile investment opportunities for pension funds.

Let us be clear: The Third Party Marketers Association’s members firmly support the concept of a code of conduct that governs the decision-making process of public and private investment plans and that leads to the disclosure of any and all conflicts of interest. What we are against is the widespread banning of third-party marketers, who operate in an ethical and professional manner and according to the rules and regulations now in place. source

This article was originally published on Third Party Marketing.com.

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