Quarterly investment letters–Tell me “What makes them great?”

Quarterly investment letters are central to many asset managers’ communications with their clients. That’s why I’m asking your help in defining what makes them great.

Please answer my six-question survey (NOTE: I’ve removed the link to this expired survey]. I’ll report on the results in a future blog post.

You inspired me. Thanks!

Investment professionals care intensely about these letters, as I learned when I asked members of  my LinkedIn Groups the following question:

The responses to this “one word” question inspired this survey. I feel fortunate to belong to this community. Thank you!

Wells Fargo Advisors ad gets the focus right

Excerpt from Wells Fargo Advisors ad

Financial advisors often struggle to communicate the value they offer to clients. I think Wells Fargo Advisors nailed it with an ad I saw in The Wall Street Journal (p. A5 on Dec. 29). The image above is excerpted from that ad.

Four things make this ad powerful, in my opinion.

1. Emphasis on the CLIENT, not the firm

More than half of the ad is taken up by a client photo. However, what the client says is more important than the photo, as I explain in point #2. Too many ads, advisor websites, and other marketing pieces emphasize the firm more than the client.

This emphasis on the client carries into more use of “you” than “we,” “us,” or “Wells Fargo Advisors.”

2. Emphasis on the BENEFIT, not the feature

The client says, “Confidence comes from knowing I have a plan for my future.” That’s a powerful statement with great appeal for many prospects, especially in a volatile year. The ad gives more attention to this benefit than to the feature, which is the plan.

3. Reassuring discussion of uncertainty

Uncertainty about the future has people on edge, but Wells Fargo Advisors is “With you when you need clarity in an uncertain world.”

The firm also has a reassuring tag line: “Together we’ll go far.” It’s reassuring, but it’s also vague enough to make it through compliance review. Nice job!

4. Effective use of numbers

“95% of Envision(r) Plan holders are able to live the life they planned.”

This is one of the client-benefit-focused statistics used in the ad. It’s powerful.

Plus, the statistic is given credibility by an external source: a survey conducted by Harris Interactive.

Communicating advisor value and Twitter

Thank you, Twitter friends, for getting me fired up about the topic. I jumped on this ad partly because of an online conversation about advisor compensation that included @MichaelKitces tweeting, “@nathangehring @MattBrandeburg @rwohlner @susanweiner I think primary reason we talk abt comp is b/c we’re bad at explaining our real value

What about you?

What do YOU think of this ad?

Can you suggest a better or different way to discuss how advisors provide value to clients?

If a “nobody” wrote Jeremy Grantham’s quarterly letter…

Jeremy Grantham of GMO is a thinker whose words command attention. Financial professionals will read his quarterly investment letters regardless of how well they’re written. But if an unknown strategist delivered the same content, she or he would not benefit from the same indulgence. In fact, few people might have advanced beyond the initial paragraph about his busy schedule. This realization prompted me to think about how I’d rewrite “The Shortest Quarterly Letter Ever,” Grantham’s December 2011 missive.

Headings: An easy fix for bullet point overload

The first two pages of Grantham’s four-page letter consists almost solely of bullet points. It isn’t easy for the human brain to process more than three to six bullet points.

If Grantham didn’t have time to do more than write bullet points, he could have asked a colleague to group his bullet points by topic under a heading. For example, he has a number of bullet points addressing the position of the U.S., which could have been grouped under headings such as

  • Challenges faced by the U.S. and the rest of the developed world
  • America’s competitive weaknesses vs. other countries
  • American social weaknesses

My headings may not be perfect, but they offer more direction to the reader who skims the letter. Right now, the only headings seen by the reader are not informative: “Notes to Myself” and “Recommendations.” Based on these headings, I’d zoom right to “Recommendations,” missing the views that underlie Grantham’s recommendations.

Bold type: Another easy aid to reading

Bold type is another way to help readers distinguish what’s more important.

For example, the following is a sentence I might have bolded in Grantham’s letter:

When one of these old fashioned but typical declines occurs, professional investors, conditioned by our more recent ephemeral bear markets, will have a permanent built-in expectation of an imminent recovery that will not come.

However, this sentence is currently buried in a 15-line paragraph. However, I do like that the paragraph starts with a bolded phrase: “No Market for Young Men.” This phrase helps readers grasp the point that Grantham gradually builds toward in his paragraph. The graph that follows is also helpful.

Massive overhaul

If I had my druthers, I’d rewrite this piece into paragraphs. The piece would start with an introductory overview. It would use headings, and possibly subheadings.

Here’s my quick, bullet-pointed introduction to Grantham’s content, with an emphasis on his strongest point.

S&P Headed for a L-O-N-G Correction

The U.S. stock market could be headed for a 14-year correction, if historical averages for corrections following bubbles hold true. Other negatives for the U.S. include

  • Demographics that also plague the rest of the developed world
  • Inadequate savings
  • The weaknesses in our infrastructure, education, and government
  • Social issues, such as greater income inequality

In light of these and other factors, I recommend

  • Avoiding low quality U.S. stocks
  • Tilting toward safety
  • Avoiding duration risk
  • Moving slowly into resources in the ground

If you’re not a “Grantham”

If you write investment commentary–and you’re not a strategist of Grantham’s stature–please keep my suggestions in mind as you draft your quarterly market commentary.

You’ll find links to more investment commentary tips in “Resources for quarterly investment commentary writers.”

Feb. 8, 2018 update: I removed the broken link to Grantham’s commentary, which is no longer available online.

Tweets from Jack Malvey’s Boston Security Analysts Society talk

BNY Mellon’s Jack Malvey spoke about the Search for Global Relative Value During the Great Transition Age, 2009-2025, to the Boston Security Analysts Society yesterday.

I tweeted some of the bits that interested me the most. I was especially interested to learn that he holds no bonds in his personal portfolio.

If YOU attended the session, I’m interested to learn your thoughts about it.

Guest post: “Creating Pitch Books Without Losing Your Mind: Design & Content Management Tips”

Margaret Patterson, the co-host on my recent webinar, is a financial pitch book expert. She has created sales support tools and provided production management expertise to numerous institutional asset managers and consultants, mutual fund companies,  and wealth management advisors for 25 years. She shares her expertise in the guest post below, which originally appeared on one of my earlier blogs.

Margaret is great about answering questions, so I hope you’ll pose some.

Creating Pitch Books Without Losing Your Mind:

Design & Content Management Tips

by Margaret Patterson

Typically many employees provide input for a firm’s pitch book. To pull all that information together you need a good plan.

1. Delegate pitch book content management to one employee. That person will be the key contact for every employee and consultant who influences the pitch book.

2. A small approval committee, 3 to 5 people, should determine what content works best.

3. Give considerable attention to investment process but whittle it down to no more than five steps. Don’t over-explain. Let your graphics be a starting point for conversation.

4. Emphasizing investment professionals’ expertise gets new business. Don’t leave out the support they get from marketing, client service, operations and reporting. Finding inefficiencies in markets, sticking to disciplined investment processes and impressive client service are the marks of well-structured firms regardless of their size. An impressive organization chart carries a lot of weight with prospects.

5. Request senior management approval only after you have a complete draft that can be defended with valor. You need a concise mission statement supported by brief, punchy text and elegant graphics. 20 to 25 pages are enough. After all, people are pitching to people. Be a good listener and let your spoken story address a prospect’s unique concerns.

6. It’s a good idea to customize books if you clearly understand your prospect’s investment objectives. Customized pages can be inserted into your standard book.

7. Handouts are also valuable tools in a high courtship pitching process. Use fact sheets, company profile handouts and composite performance PDFs to provide more detailed information. Handouts also help you control who gets the information and when. Conversely, prospects will resort to taking phone calls and planning golf games if your pitch book is too long and intense.

I create a PowerPoint design system guide for each client to help them maintain consistent, effective messaging.

Input and questions are welcome. Your thoughts may show up in future articles, so let me know if I can quote you.

Reader question: How can communicators manage difficult portfolio managers?

Investment communications professionals and portfolio managers don’t always see eye to eye on investment commentary, white papers, and other publications. But there are ways to manage business people in discussionyour differences, especially if you set expectations before portfolio managers write or even propose publications.

You asked, so I’m answering

Some of my readers asked, “What you can do when portfolio managers think their topics and writing are great, but you know they’re not?” Sometimes the experts propose topics that fascinate them, but they struggle to explain how the topics will appeal to their intended audience. Also, it’s not uncommon for experts to become engrossed in details and technical terms, but neglect to explain the big picture.

I had some ideas about how to manage these situations. And I picked up some more from my colleagues on LinkedIn, after bouncing my ideas off them. I’m quoting people only if they gave me their permission. Thank you, friends!

A five-part approach

In my opinion, there are five parts to an effective strategy for dealing with the portfolio managers.

  1. Use a process for considering topics.
  2. Create communications standards.
  3. Discuss.
  4. Edit.
  5. Get support from your boss.

1. Establish a process

Communicators can avoid conflicts by putting a process in place. As David Scales suggests, “If someone has what they think is a great idea, they should come to you first and discuss. Together, you can define the target audience…and key points to include.”

Julie Fordyce agrees, saying “If you get him thinking about these things seriously before he starts writing, then you can help him structure the paper properly at the outset and avoid the brain dump — the ‘here’s everything I know about this topic, and every chart and graph I’ve ever come up with’ problem.”

This is also the best time to squash potential white paper topics by pressing the portfolio manager about “Why will this topic interest the audience?” I like to ask “What problem does this topic solve for your readers?” and “Why will readers care about this topic?” Writer Nancy Miller says, “Investment professionals tend to think about what they know and what they want to tell. I try to get them to flip it around: What does your reader want or need to know? What’s the best way to make that happen?”

2. Create communications standards

Establishing written guidelines for your communications helps portfolio managers to understand why communications managers balk at their topic ideas and drafts. Your guidelines might be as broad as “You must establish in the first paragraph how this affects an affluent investor’s portfolio” or as nitpicky as “The plural of Treasury is Treasuries.”

I’m a big believer in explaining right away why the reader should care about the topic of any communication. If I worked on staff, I’d make that part of my firm’s communications standards. I’d also implement standards about exhibits, in addition to the usual style guidelines.

Style guidelines can defuse disagreements. Jenny L. Herring, who established style guidelines based on AP style, says, “It helped to be able to back up my guidelines with a standard reference work. It also helped when the heads of certain asset classes scheduled meetings with the portfolio managers to emphasize the importance of meeting deadlines and following style guidelines.” Support from the top always helps.

Your standards may vary depending on the audience for the final document. “Basis points” or even “bps” is fine for a time-sensitive communication between bond managers, but neither expression belongs in a document for individuals who are new to investing.

3. Discuss

Even if you have a process in place and your portfolio managers do their best to follow your guidelines, you still may run into problems. After all, portfolio managers aren’t professional writers.

This is when you should discuss the document. I suggest that communicators first say what is good about the document and then ask for help in building on the good things. Identify why the document doesn’t meet your firm’s communications standards. Criticize the piece, not the person.

I like this suggestion by Miller for dealing with portfolio managers who get bogged down in details: “I ask what they prefer to read — a document that shows the writer’s expertise or the document that gets to the point right away?”

Be realistic in your expectations. You can’t expect a busy portfolio manager to memorize your style guide. The communications professionals will probably have to do some fine-tuning before a document reaches the public.

4. Edit

Communications professionals should be prepared to edit as necessary. Do the best that you can, but you don’t have to fight over every little mistake. As Jeff McLean says, “Financial markets move too quickly to worry about a hyphen that the CEO mistakenly insisted on changing because it ‘didn’t look right.’ Recall that his or her name is on the piece, not the name of the ghostwriter or editor.” Bennett Inkeles agrees, “Do your best work, make a case for what’s right, then move on with a smile.”

Remember that sometimes the portfolio manager is right, even when their phrasing seems wrong. “I had a conversation with a financial writer who came to blows with a PM over verbiage he believed did not make sense. However, based on my experience, the verbiage in question made perfect sense,” says Inkeles.

In some cases, it makes sense to let portfolio managers sound like themselves, especially when a piece runs under the manager’s byline. “Readers want an authentic voice, not a Victorian grammar lesson,” says David Lufkin.

5. Get support from your boss

Sometimes you have to override a portfolio manager’s objections. I’d do that if a manager threw terms like duration and convexity into a piece for individual investors. In cases like this, it’s helpful to have your manager’s support.

March 11, 2013 update: I corrected a grammatical error in this piece. Yes, I make them, too.

Image courtesy of Ambro at FreeDigitalPhotos.net

NICSA General Membership Meeting in tweets and posts–#NICSAGMM

The NICSA General Membership Meeting on October 6 addressed challenges facing investment managers and their service providers. Compared to other industry conferences, it emphasizes the “back office” functions that support investment professionals. In this post I present some of what caught my attention at the conference–mostly information about regulation and marketing.

The short statements are tweets, grouped by speaker. I also link to my blog posts on the meeting. In case you’re wondering, #NICSAGMM is the hashtag used on Twitter to help people find tweets related to the conference.

My blog posts about #NICSAGMM

OppenheimerFunds on the separation of marketing and sales

Citi on financial services’ biggest potential social media mistake

Opposing financial services’ social media paralysis at #NICSAGMM

Robert Pozen, MFS Investment Management, on financial reform

The back office makes mutual industry go, says Bob Pozen, MFS #NICSAGMM

Bob Pozen: SRI = systematically risky institutions. Means lots of extra regs #NICSAGMM

Pozen: Cost of SRI bailouts borne by other SRIs, NOT taxpayers #NICSAGMM

Pozen: Proprietary trading will shift from US banks to least regulated countries and companies with Volcker Rule #NICSAGMM

Pozen: Good change with Dodd-Frank: clearing for derivatives #NICSAGMM

Pozen suggests investment advisors form their own SRO #NICSAGMM

Pozen: C shares will be required to convert to A shares eventually #NICSAGMM

Pozen: Fluctuating NAV for money market funds would be end of MMFs for retail investors #NICSAGMM

Pozen: Hope we don’t over-regulate MMFs. Only 2 broke the buck #NICSAGMM

Pozen: Public-private firms like T Rowe, Franklin, Legg Mason, Black Rock will be winners in asset mgt #NICSAGMM

Pozen: Public-private means some public stock, but strong internal mgt control #NICSAGMM

Pozen: Restricted shares shouldn’t vest just because you’re still alive. Tie to performance. #NICSAGMM

Pozen: “Mortgages are the big banana that has never been touched.” Barely touched by Dodd-Frank #NICSAGMM

Pozen: Qualified residential mortgages (QRMs) will be important. Downpayment requirement will be key. #NICSAGMM

Bob Pozen: Europe has solvency crisis, US doesn’t have one…yet #NICSAGMM

Pozen: Repeated budget crises -> instability. Need to bring back compromise. #NICSAGMM

Pozen: Another crisis is inevitable at end of 2012 when Bush tax cuts expire & budget is issue #NICSAGMM

Pozen: Customers want best products at best price. #NICSAGMM

Pozen: People don’t understand inverse relationship between interest rates and bond prices #NICSAGMM

Marty Willis, OppenheimerFunds

Marty Willis, Oppenheimer Funds: Mutual funds’ biggest challenge = lack of differentiation. #NICSAGMM

Willis: New tech will allow wholesalers to improve the value they offer. Like pharmaceutical reps. #NICSAGMM

M. Willis, Oppenheimer Funds: Marketers’ toolkit now more complete. #NICSAGMM

M. Willis: Fund marketing has become editor of content across web, print, social media. #NICSAGMM

OppenheimerFunds is using predictive modeling to help wholesalers decide who to call on. #NICSAGMM

Peter Thatch, Merrill Lynch Global Wealth Management

Peter Thatch, Merrill Lynch Global Wealth Management: “Clients’ risk appetite has fallen off the cliff.” #NICSAGMM

Thatch: Products that meet clients’ current needs are more complicated #NICSAGMM

P Thatch: You’ll see more global TAA with risk parameters. #NICSAGMM

Joseph D. Kringdon, Pioneer Funds Distributors/Pioneer Investments

J. Kringdon, Pioneer Funds Distributors: If you died tomorrow, what would your clients miss about you? That’s your value. #NICSAGMM

J. Kringdon, Pioneer Funds Distributors: Clients don’t care about benchmarks #NICSAGMM

Kringdon: Pioneer Investments tries to build its intellectual capital & deliver in multiple media #NICSAGMM

Visit multisectorbond.com to see creative site for advisors to back-test fund #NICSAGMM

Lee Kowarski, kasina

L Kowarski of @kasinaUS: Compensation is broken, but no one wants to lose wholesalers. #NICSAGMM

Penny Alexander, Franklin Templeton Investments

Penny Alexander, Franklin Templeton: Best biz growth opportunities for fund cos = non-US #NICSAGMM

P Alexander: Most developed countries aren’t breeding any more. #NICSAGMM

P Alexander: $10/month invested by world’s middle income earners−>$391 billion in annual gross sales. #NICSAGMM

P Alexander: Need scale to manage lots of small accounts #NICSAGMM

Cartoon: “If we take a late retirement and an early death, we’ll just squeak by.” #NICSAGMM

P Alexander: 3-legged stool for retirement isn’t enough #NICSAGMM

P Alexander: Retirement now needs a kaleidoscope with lots of little pieces. #NICSAGMM

P Alexander: Fund industry can affect mindset & behavior to meet retirement challenge. #NICSAGMM

Penny Alexander: Technology is key to reaching next generation of investors. #NICSAGMM

P Alexander: Muslim investors don’t get as much attention as they should. #NICSAGMM

OppenheimerFunds on the separation of mutual fund marketing and sales

Differentiation is a big challenge for mutual funds companies. Part of how OppenheimerFunds tackles this is through the separation of marketing and sales, said Marty Willis, chief marketing officer. She spoke on a mutual fund distribution panel at NICSA’s General Membership Meeting in Boston on Oct. 6.

Creativity, not just sales support

When sales and marketing were together, marketing’s focus was too short-term and reactive, said Willis. In other words, it focused on sales support.

Even when the company tackled larger goals, such as raising brand awareness, it didn’t go far enough. Many consumers didn’t know what the brand stood for.

Today Willis is focusing on getting OppenheimerFunds’ brand to “permeate all touch-points,” even including customer service and philanthropy. It all feeds from one vision, like Apple’s “Think Different.”

Globalization and “snackable content”

GlobalizeYourThinking.com is one example of Willis’ vision. This micro-site features what Willis called “snackable content.” “It’s easy to digest and good for you,” she said. In a nod to social media, can be shared by advisors with their clients. It’s also available as a mobile app.

The site has attracted over half a million viewers and has 5000 unique visitors per week, said Willis. Visitors have averaged 7 minutes on the site. That’s twice as long as advisors spend on the firm’s other website, Willis said.

Global Tracker initiative

Willis touched briefly on her firm’s Global Tracker project, which it is developing with The Economist. The project has two facets. One is to allow users to call up all sorts of country, industry, and investment product information online. The other is a kind of game in which advisors compete.

Willis experienced the power of games when she skied in Vail, Colorado, where your ski pass allows you to track your vertical feet. She found herself taking extra runs so she could earn icons or other acknowledgments of hitting milestones.

OppenheimerFunds part of marketing trend

Oppenheimer’s elevation of marketing reflects a broader trend, said Lee Kowarski of kasina, who moderated the panel on which Willis spoke.

Marketing is becoming more peer to sales, instead of focusing on sales support, he said.

Resources for quarterly investment commentary writers

If you’re about to start writing your quarterly investment performance commentary, you may find the following resources useful.

Mind mapping technology for financial advisors

Technology can boost your effectiveness when you use mind mapping with your clients.

Using a digital pen in client meetings will spare you the inefficiencies of an old-fashioned pen or pencil as well as the awkwardness of struggling with complex mapping software in front of your client. After the meeting, using software to make your map more attractive and to manipulate the data will make you more effective with your clients. I recently learned how Jaime Bordelon, executive assistant for an investment advisor, uses a digital pen, in addition to MindJet and SmartDraw software, to capture and share information collected in client meetings.

Five-step process for your client meeting

Here’s the five-step process Jaime suggests for your client meeting.

1. Take your digital pen to your client meeting, along with an appropriate template. Jaime’s firm has templates for topics such as new client, prospect, center of influence (financial advisorspeak for referral source), re-discovery meeting, asset allocation, next phase, and retirement distribution.
2. Begin a general conversation and map it using your digital pen. Expand into more details.

3. After the meeting, you and the client sign the map to show that both of you agree on the information.
4. Dock your pen to save the data on your computer.
5. Give the client the original copy of the map. It’s satisfying for the client to get something to take away.

By the way, Bordelon uses an Okidata MC560 Plus Digital Two-Pen Solution purchased from Futureware in Omaha. It appears have been discontinued.  But there are other digital pens out there and you may find the Okidata model left in stock somewhere.

Mapping’s prospecting potential

“What’s really interesting is what happens after the client takes the map home,” says Bordelon. Mind maps are conversation starters in a way that plain text documents are not.

Sometimes clients leave their maps out in plain sight. Then, a friend sees and asks about it. Before you know it, you’ve got a referral. In many cases, these are referrals of persons whom your clients wouldn’t have suggested on their own initiative.

Another benefit: your clients often think of more information to add when they review the map later. This is especially true when they show it to the spouse, significant other, children, or friends.

Using MindJet or SmartDraw after the meeting

After your meeting, you or your assistant can clean up your map and make it more attractive by inputting the information into MindJet or SmartDraw. You can also color-code sections to make the information easier to understand at a glance.

The resulting map isn’t just pretty and digital. Using the software, “You can expand and collapse the ‘octopus’ it creates,” says Bordelon. “This way you can control the conversation and avoid overwhelming your clients with details” in subsequent client meetings. It’s also easy to update the map in future meetings.

What are you waiting for? Give it a try!


P.S. The beauty of LinkedIn

I owe LinkedIn as well as Jaime Bordelon for this blog post. I didn’t know her when she responded enthusiastically to a mind mapping question I posted on LinkedIn. LinkedIn can be an amazing resource for meeting new people.

Edited October 2, 2011