Advisors need to be attuned to evidence of what investors think about what they are doing, such as in cases where clients are tight-lipped in certain interactions.
At a time when wealth management firms say that they spend considerable time on planning how to improve the client experience, an important area to get right is how to use the comments clients make. “We listen to feedback” sounds all very worthy, but a suspicion must be about how far firms really do go in putting feedback to tangible use? Can this be measured and benchmarked? Also, how can clients measure what effect their comments have without independent data? We live in a world where businesses use the internet to build online reputations (think of cases such as Amazon, Airbnb and Trip Advisor) but even here, there can be confusion about what some ratings mean, whether they might be skewed or biased, and so on.
New Year resolutions are still, perhaps, on people's minds so maybe it is an auspicious time to consider cultivating good habits, and handling client feedback is such a topic. Diane Harrison, a frequent commentator for Family Wealth Report, advises industry practitioners not just about what people say, but to consider cases where clients are holding back or not commenting at all. Silence doesn’t mean approval, in certain cases. Diane is the owner and principal of Panegyric Marketing
As ever, the editors do not necessarily agree with all comments of guest writers and invite readers to respond. In coming weeks, FWR will look at issues concerning client reporting, as part of its forward schedule of features for 2019, and we urge readers to contact us with views about this important topic. Email firstname.lastname@example.org
Pitching to investors can be an unnerving process even for sales professionals. No one wants to be in the position of needing someone to buy in, literally, to what they are selling, in order to stay alive in business. Yet for most fund managers, this is exactly what is required of the pitching effort: no convincing, no capital, and soon, no fund. Regardless of investment specifics, potential pitch mishaps exist which cause investors to lose interest and focus. Knowing the issues that trigger investor ennui or ultimately turn off an individual and taking a proactive approach to combating them can help managers position their pitch more favorably.
The industry’s financial regulatory authority, FINRA, established an Investor Complaint Center to capture and address common complaints from investors regarding their brokers and/or the firms that employ them. In providing this information on their website, FINRA educates investors on the type of problems frequently reported, how to avoid these problems and what to do about them if encountered. The advice FINRA provides to investors about their advisors can also apply to fund managers for their pitch efforts. Some of the questions the FINRA site suggests that investors might consider exploring include: How is this in line with my investment objectives? What is my risk of losing money on the investment? What has been the past performance of the investment? How liquid is this investment, and what are the costs of liquidating the investment and other barriers to sale?
When selling, listening is three times as important as talking. How can you address the critical needs of an investor if you aren’t trying to ascertain what those needs are? Most experienced sales professionals would agree that an investor who spends most of their time raising objections and giving excuses for why they haven’t considered a particular type of investment is not likely to be turned around. These meetings are not typically going to lead to investment, but might provide useful information on weak points in the pitch sale itself. However, those investors who ask probative questions and provide thoughtful answers to questions posed to them tend to be signaling that they are interested in exploring the offering further. Sales professionals and fund managers can identify which type of pitch meeting is happening and respond accordingly.
Don’t confuse asking the investor what it is they want from you with being prepared to describe what it is you offer. This is a real distinction with a difference. The most important element of convincing a prospect that you have something they want or need is to determine what is their problem or desire. But the ability to articulate how to provide the solution or the commodity they seek is integral to making a convincing sales case. A fund manager or their salesperson may not always be able to feel out an investor’s true wants or needs—that may be out of their control in terms of information gathering on any particular day. But delivering a clear, consistent description of how the fund invests and runs its investment activities from identification through execution to exit strategy is a conversation always within the control of the fund manager or salesperson, requiring only adequate preparation. Don’t shortchange the full investor dialogue that can be had with less than a solid description of what it is the fund does and how it gets done.
Don’t denigrate the investor’s opinions about other investment options, both within and outside of your strategy. If you are in alternatives, you are a minority player within an overall investment scenario.
Overwhelmingly, investors spend their attention, energy, and investment allocations on non-alternative issues. Alternatives are an enhancement and an insurance buffer to their investment goals, an important element, but essentially a minority play. Trying to convince an investor that their underweighted alternatives allocation is a mistake will only make you sound desperate and elitist.
Rather, use the time you have with these prospects to underscore the role your strategy plays within the enhancement/insurance angle and explore how that might be maximized for them at whatever slice of the portfolio they feel is appropriate to allocate to alternatives. Better to win over a 3% investment than turn off the investor entirely by trying to tell them their 15% overall allocation in alternatives is inadequate. Once onboard with you and having gained their trust through an established relationship, you can explore further commitment to your alternative approach.
Innovation is worthless if it isn’t matched by execution. Funds that offer investors something unique and attractive are only viable if they can continue to be so as they grow and move through changing market scenarios. The mere fact that an investment manager can do something currently no one else is doing might mean they are ingenious, or it might signify that the exercise is one of futility. If an investment approach isn’t scalable to some meaningful extent and certainly repeatable, then it has no place as the cornerstone of a fund offered to others.
Take the time to explain to investors you have prepared for all the requirements a well-run fund operation requires: investment research and risk management, trading execution and regulatory compliance, fund accounting and reporting, etc. The investor may not ask specifically about these issues, but they assuredly won’t invest if they feel these issues are lacking in an offering.
Pick the right audience in the first place. Don’t try to sell apples to an orange juice producer. Time is too precious a commodity to waste on pitching to people who are very unlikely to want what you have. Spend time in advance to identify the most likely segments of the investor community to go after, and focus on them. Selling is a labor intensive process in its best case scenario, so why make the process harder and less successful than needed?
The burden is never on a prospect to inform a sales professional that they aren’t a serious investment candidate; in fact, most uninterested investors will maintain a polite poker face and reveal little about their true feelings during the pitch itself. For them, it’s a half hour or so of time that is a dead end—annoying, but not a big deal. For a fund manager, compiling hundreds of such dead end meetings can spell disaster for a fund’s growth and viability. While selling anything is a numbers game, increasing the likelihood of pitching to a receptive audience impacts the winning ratio and is well worth the advance effort made to identify the right targets.
About the author:
Diane Harrison is the principal and owner of Panegyric Marketing, a strategic marketing communications firm founded in 2002 specializing in alternative assets. A published author and speaker, Ms Harrison’s work has appeared in many industry publications, both in print and online.