May 2012 on the Investment Writing blog

Here are the links to posts you missed during May 2012 on the new Investment Writing blog:

• InvestmentWriting.com is one of “7 Financial Advisory Blogs that Rock”
• Ideal quarterly investment letters: Meaningful, specific, and short
• Pink trash: An Internet-era reminder
• How a blogging buddy can help your financial planning or investment blog
• Poll: Advisor vs. adviser
• Refresh your grammar and usage skills with Mistake Monday
• Technology tip: How to create a low-tech virtual class
• Guest post: “Do Questions Make Good Titles?”
• NAPFA Genesis email example and top lessons

____________________  
Receive a free 32-page e-book with client communications tips when you sign up for my free monthly newsletter.  

Copyright 2012 by Susan B. Weiner All rights reserved

On the Investment Writing blog during October

Here's what I covered on my InvestmentWriting blog during the previous month:

• Lessons from “Presentation Skills for Investment Professionals”
• Six tips for snaring reporters with your market commentary
• Guest post: “What’s a tomato got to do with getting your fund discovered?”
• Guest post: “Investment analysts and social media”
• ISI’s Straszheim: China’s interest rate hike is “tapping the brakes”
• Cautious optimism on emerging market stocks from SSgA’s Hoguet
• Bubble? — Emerging markets scrutinized by CFA Institute conference
• Notable quotes from the CFA Institute’s emerging markets conference
• LinkedIn’s fatal flaw for financial advisor compliance
• Do the robin, the reindeer, and the building sing the same song?

____________________
  Receive a free 32-page e-book with client communications tips when you sign up for my free monthly newsletter.  

Copyright 2010 by Susan B. Weiner All rights reserved

October updates to the Investment Writing blog

If you’re not visiting my InvestmentWriting blog in its new location, you’ve missed the following posts over the last month:

• Should the Morningstar style box go 3-D? Quality counts, says Atlanta Capital
• Poll: “Investable” or “investible”–which spelling is correct?
• My five favorite reference books for writers
• no, No, NO: My business card shouldn’t add me to your e-newsletter list
• Guest post: "How Seeking Alpha Can Build Your Professional Reputation"
• Your spell checker doesn’t work, so you must proofread
• Effective writing and blogging is faster with a plan
• Four lessons from Wasatch Funds on reporting underperformance
• Guest post: “Would you like to know how financial advisors are choosing products?
• Blogging buddies: Financial bloggers’ secret weapons

____________________  
Receive a free 32-page e-book with client communications tips when you sign up for my free monthly newsletter.  

Copyright 2010 by Susan B. Weiner All rights reserved

"Where Are We Heading? The Future of Investment Management in Boston"

The future of investment management in Boston was the focus of a panel presentation to the Boston Security Analysts Society's annual meeting on June 24. The view that Boston is being left behind made the greatest impact on me, but I'll report some of the opinions of all four speakers.


Reamer: Emphasis on actively managed equities hurts Boston
The investment world is shifting toward aggressive hedge funds and passive quantitative funds, said Norton Reamer, vice-chairman and founder, Asset Management Finance LLC. There's also currently an emphasis on fixed income. This is because the public has been discouraged by the stock market returns of the past two years. They want defensive, safe investments. On a related note, large pension funds are moving more toward indexing.


These trends don't favor Boston, the home of the original mutual fund, because local firms emphasize actively managed mutual funds. At least these trends don't bode well in the immediate future.


For Boston to prosper, it must attract assets from around the world, said Reamer. However, he sees the action shifting to New York, London, and even Philadelphia and California. Boston has only one of the 10 largest hedge funds and three of the 30 largest. While Boston has a history of venture capital, venture capital is less important than private equity, which is concentrated elsewhere, said Reamer.


One of Reamer's comments held a glimmer of hope. Universities--along with arbitrage groups, traders, and others--are the source of the new ideas that are changing the investment world. Boston has some great universities. Perhaps the universities can fuel the region's resurgence as an investment center. I'm happy to note that the Boston Security Analysts Society's program committee has a subcommittee devoting to inviting speakers from academia.


Putnam: Four trends will create many losers, few winners 
Investment management is a craft, said Don Putnam, managing partner of Grail Partners, who moderated the panel. He emphasized the need to avoid losing sight of the craft before he described the four trends that he believes are changing the industry.


As a result of these trends, there will be many losers and few winners, said Putnam. The winners will be global firms as well as small cadres of capable people. The big challenge for money management will be to connect these two groups.


Trend 1: The long, complicated supply chain is reordering. For example, people are seeing the problems with "the slices taken off for people who deliver golf balls." I assume Putnam was referring to wholesalers and the broader issue of 12b-1 fees and the like, though he said that he was not making a case for fee-only advisors. Changes are coming as a result of regulatory pressures, client demands, and "better mousetraps," such as ETFs and active ETFs. Putnam said he's sceptical about growth opportunities for the mutual fund industry.


Trend 2: The relevance of specialization is declining. Why? Because the efficient frontier--and the need to diversify into many slices of the market--has been challenged. "It has been proven to be nonsense for the client," said Putnam. Clients' "true utility equation" can be delivered more efficiently with quantitative solutions, he added.


Trend 3: The arithmetic of the investment business is changing with the rising importance of asset allocation. As the utility of money management has declined, fees have risen, said Putnam. This can't last. While clients have bought the "myth of comfort and control," the past three years have increased client dissatisfaction.


Trend 4: Technology is increasing in importance. Technology should be woven into every aspect of money management, said Putnam. Technology's influence on money management has barely begun.


Manning: Structure your firm to have an edge over your competition 
You must deliver great results to keep assets, said Robert J. Manning, who spoke as CEO of MFS Investment Management, but is scheduled to become the firm's chairman on July 1. This means you must structure your firm to have an edge over your competition. Manning discussed three key elements of MFS' structure.


1. Follow a long-term investment philosophy. The world is preoccupied with short-term investment returns. However, MFS believes that you need a culture of long-term investing backed by an appropriate compensation structure. When MFS conducts performance reviews, it only considers periods of three years or longer.


2. Create a global footprint. If your people are only in Boston, you can't be a winner, said Manning. For example, if you don't have staff in Europe, you can't respond quickly enough when credit default swaps widen in Europe. As part of the global footprint discussion, Manning emphasized the need to integrate the firm's fixed income and equity teams.


3. Analysts are more important than portfolio managers. The old model is broken, said Manning. The most important employees are career analysts who have expertise in specific sectors. MFS has eight global sector heads. These are the people who, if they "see a storm coming" get the entire firm out before it hits.


The increased importance of analysts has been driven partly by the fact that clients want to buy "specialized sleeves of alpha." This is reflected in analysts' compensation. At MFS, analysts earn more than portfolio managers.


We sell the global research platform, not the portfolio manager, said Manning. The portfolio manager simply assembles the alpha streams from the analysts the way that clients want.


Hughes: Confident in Boston's future 
Larry Hughes, CEO of BNY Mellon Wealth Management, said that Boston's talent and innovation makes his firm feel confident about Boston's future.


Still, the next decade will pose challenges for wealth managers in terms of how to protect clients against continued market volatility and how to capture the related opportunities. Hughes suggested three areas for focus.


1. Investment innovation--The "set it and forget it" ways of the past won't work any more, said Hughes. It's important to capture trends that develop--and disappear--in months, or perhaps even just weeks.


2. Seamless and dynamic planning--Wealth managers must "plan across silos," considering all aspects of clients' lives, including taxes, estate planning, health care, and more.


3. Better manager-client engagement--It's important to speak in your clients' terms. Clients don't talk about the efficient frontier, standard deviation, or r-squared, said Hughes. So neither should wealth managers. Instead, wealth managers should present issues in straightforward terms, such as "helping you maintain your lifestyle."

Related posts:
* Investment management career advice from industry pros
* "Have mutual fund fees gone up or down?"
* GMO's Jeremy Grantham on "The Ethical Hole in Finance" at #CFA2010
____________________  
Receive a free 32-page e-book with client communications tips when you sign up for my free monthly newsletter.  

Copyright 2010 by Susan B. Weiner All rights reserved

BNY Mellon: I liked your "truth ad" until you used that word

BNY Mellon Wealth Management has a catchy new print ad asking "Can you handle the truth?" 

I love the simplicity of "Can you handle the truth?"

You can view one version of the ad on BNY Mellon's website. However, I first saw this family of ads in the print version of The Wall Street Journal. 

Print vs. online ad
The Wall Street Journal version uses the same big "truth" box, but it is mostly better than the online version.

It's better in the sense that much of its text is simpler and more direct than in the online version. I imagine that individuals seeking financial advice would find it very appealing. Let's compare the two versions. 

Print version

The truth is most investors' portfolios did not handle the past years' market volatility well. A more alarming truth is that most plans have not been changed to mitigate future risks or capture opportunities.

We have helped many investors with an honest assessment of their current portfolio and plan. May we help you?

The first sentence is disarmingly honest. At least in my eyes. 

The language charmed me until I got to "mitigate." If you're a regular reader of this blog, you know I don't like "big words" and "mitigate" is one of my pet peeves. Why couldn't the writers substitute "ease," "cut," "reduce," or even "manage" for "mitigate," depending on what they meant? I suspect that a lawyer or compliance person pushed for "mitigate."


Online version 
The first line of the online ad's text--which you can read in the indented section below--is much stiffer and institutional. It doesn't sound like something a human being would say in conversation. I've italicized the words I don't like in this ad's text below.  

The rest of the text is better. I like the second sentence. However, in the fourth sentence, "complimentary analysis" suffers when compared with the "honest assessment" of the first ad. Also, "please contact us" isn't as appealing as "May we help you?"

Fundamental changes in the financial landscape have rendered many investment plans null and void.

Your plan may be one of them.

Let us help you learn the truth about whether your portfolio is positioned for the years to come.

To get started with a complimentary analysis of your investment plan, please contact us.

Related posts
* Timely, creative financial ad from Northwestern Mutual
* No more fancy-pants prose, please
*  Financial writers clinic: Getting rid of "mitigate"
* Can you make a case for "mitigate"?

____________________
  Receive a free 32-page e-book with client communications tips when you sign up for my free monthly newsletter.  

Copyright 2010 by Susan B. Weiner All rights reserved

Marketing via U.S. mail still pays

"Don't give up on mail," wrote marketing consultant Libby Dubick in "Four marketing resolutions for 2010." I agree that investment and wealth management firms should continue to use the U.S. mail.

Letters and brochures ranked high when Dubick conducted an informal survey of how senior marketing executives would like to be introduced to a wealth manager. They came in second only to personal referrals.

If you write a sales letter, remember these tips

• Emphasize your prospect's WIIFM--What's In It For Me--rather than talking about your firm
• Keep it short--People have short attention spans.
• Don't send it and forget it--Follow up with the individual.

Related posts

• Guest post: "The Lost Art of the Thank You Note"
• Your mail has three seconds to grab your reader's attention
• Guest post: Can I replace my print newsletter with an e-newsletter instead?" 

 ____________________
The next session of "How to Write Blog Posts People Will Read: A Five-Week Teleclass for Financial Advisors" will start in September. For more information, sign up to receive "Information on upcoming classes, workshops, and other events" as well as my free monthly newsletter. Copyright 2010 by Susan B. Weiner All rights reserved

Harry Markopolos on "next Ponzi scheme"

"Where do you think the next big Ponzi scheme will occur?" That's what I asked Harry Markopolos, author of No One Would Listen, during the Q&A following his March 30 talk to Boston Security Analysts Society (BSAS).

Markopolos isn't too worried about seeing another big Ponzi scheme soon. He gave two reasons.

1. Markets are down. That's what triggered the redemptions that brought down Madoff and others.
2. The SEC is now making Ponzi schemes a high priority.

However, most Ponzi schemers don't register with the SEC, said Markopolos. That helps them to stay hidden from the SEC. Markopolos said the SEC typically finds out about Ponzi schemes through tips. The many poor-quality tips submitted to the SEC make it hard to sort out the good from the bad. 

If you'd like to learn more about Markopolos' perspective, check out his book. Many BSAS members lined up after the talk to have him sign their books. He's a hometown favorite and past president of the BSAS.

Related post
* Tweets on talk by Harry Markopolos, Madoff whistleblower





____________________ 
The next session of "How to Write Blog Posts People Will Read: A Five-Week Teleclass for Financial Advisors" will start in April. If you can't attend this session, sign up to receive "Information on upcoming classes, workshops, and other events" as well as my free monthly newsletter.
Copyright 2010 by Susan B. Weiner All rights reserved

Guest Post: My Six Best Marketing Tips for Independent Advisors

When Steve Lyons spoke with me about his tips for helping financial advisors market themselves, I knew that I'd like to share them with you. When I first met Steve, he was a copywriter for Fidelity Investments. Today he enjoys working with clients of all sizes, including individual advisors.

My Six Best Marketing Tips for  Independent Advisors
by Steve Lyons

As a professional marketer and copywriter specializing in advisor communications for print and the Web, I know firsthand the challenges independent advisors face in marketing their business to investors. Whether  you’re a veteran or just beginning your practice as an independent financial advisor, these marketing tips can help you stay on track to achieve your goals.

1.    You’re not just a business, you’re a brand. True, your business relies on you – as a financial advisor and person. But take the initiative to create and build your business as something that is bigger than you are – a brand with goals and values. Work with a reputable marketing consultant or firm to help you understand and tell the world how unique you are. And more, take your brand development and marketing as seriously as the big firms. They’re spending and working overtime to make sure that investors do not notice you.

2.    Quit talking about yourself. Successful marketing begins with telling your audience the BENEFITS of working with you – not the details of your personal or professional life. It may be interesting that you have a master’s degree in finance, but it’s much more powerful to talk about how your degree creates opportunity for your clients.  Use your one-to-one sale time to be more specific about why you as an Independent Advisor and person and why you are the advisor for them (and they’re the client for you).

3.    Remember, you’re not selling only financial advice. You’re selling a lifestyle. What sets the larger and more successful firms apart from less successful independent advisory firms? They understand that money management is only the means to an end. The real goal is to help clients achieve their goals and dreams, whether it’s living in luxury, providing charitable contributions and/or leaving a legacy for family and friends.  Use imagery in your marketing that helps them see their financial future as they want it to be--fun, exciting, adventuresome and secure.

4.    Understand what makes you different.  It’s important to know what makes you different from the advisor down the street.  Is it your investment philosophy? Your investment strategy? Do you offer a fee-discount for multi-generation wealth management?  Do you accept only select clients by referral only? Whatever it is, and the list can be extensive, know why you are different from your competition.

5.    Create a marketing plan. And implement it. If there was ever a time for independent advisors to make a difference, the time is now. There is more cash on the sidelines than any time in modern history. How do you obtain some of the stockpile? By creating a marketing plan that includes long term and short-term goals. Regardless of your budget, there are opportunities for you to get your name out there.

6.    Think out of the box. Your clients are everywhere. You have to find them and they have to find you. Sponsor community programs, leagues and events. Create a billboard. Write guest columns for local publications. Create a blog. Use social networking on the Web. Make calls. Make more calls. If this feels overwhelming, hire a reputable consultant or firm to help you think out of the box and execute marketing programs that builds and supports your brand. 

Steve Lyons's experience includes marketing, copywriting and content development for both Fortune 500 and small businesses, with clients including numerous independent advisors and wealth managers throughout the country. He is a principal in LD Marketing Communications Consultancy and SoWa Ad Group, a collaborative offering the full branding experience, including public relations, for businesses of all sizes.

____________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2010 by Susan B. Weiner All rights reserved

Harvard's Charles Collier on "The Practices of Flourishing Families"

 "The critical challenge you face is not financial," said Charles Collier, senior philanthropic adviser at Harvard University in his presentation on "The Practices of Flourishing Families" to an audience composed mostly of wealth managers at the Boston Security Analysts Society on December 15, 2009. He believes "The most critical challenges are relationship-based and family-based."

Of course, money plays a role in these challenges, so this is a topic that should concern all wealth managers. Whether it's scarce or abundant, money is a challenge in every family, said Collier.

Three questions are critical to addressing family challenges, said Collier.

1. What topics are easy or difficult for your family to discuss?
2. How do you manage yourself in life's transitions?
3. Is family harmony an important principle for you, and, if so, why? 

Collier's interactive presentation focused on Question 1 and raised the following difficult questions around finances:

1. What is an appropriate inheritance for your child?
   
2. Who gets the money, and when? Do they get equal shares?
3. Who gets information about the money and when?
4. How much will go to philanthropy?
5. What do you think will be the impact of unearned money on your child's life?
6. How can you encourage your children to find their life calling?
   

Collier did not suggest how financial advisors should raise these questions with their clients. So, I'm asking you, how do YOU address these questions with clients? Do you address them at all?
____________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Which wealth managers have the highest profit margins?

People are always curious about who makes how much money. That's probably why I zeroed in on the profit margin comments made by investment banker Elizabeth Nesvold, managing partner of Silver Lane Advisors, when she spoke about "Trends Amid Turmoil in the Wealth Management Business" to the Boston Security Analysts Society on November 18.

Because multi-family offices (MFOs) deal with wealthier clients than financial planners, I was surprised to learn that their margins are lower than financial planners' in typical market scenarios, ranging from 10%-30% vs. 20%-35% for financial planners and asset allocators. However, the difference made sense when she explained that MFOs get hurt by "scope creep." It's expensive to service a multi-generational family as compared to an entrepreneur who just sold his or her business, Nesvold said.

Here's the hierarchy of margins under typical market scenarios, in descending order, according to Nesvold.

1. Hedge funds, 50%-70%
2. Hedge funds of funds, 25%-60%
3. Traditional institutional, 30%-70%
4. Investment counsel, 25%-40%
5. Financial planning/asset allocation, 20%-35%
6. MFOs, 10%-30%
   

Do these margins sound realistic to you?


____________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Why I write for you

You can reach more clients and prospects when you put your useful ideas into writing. However, many investment and wealth managers lack the time--or maybe the skill--to put ideas into writing persuasively. That means your audience loses an opportunity to benefit from your expertise.


I feel pain when I see great ideas hidden behind weak writing. That's especially true because I know a good editor or writer with industry knowledge could shape your ideas into compelling prose.


I enjoy taking complex information and making it clear to readers at any level of sophistication. While you may get your thrills from helping your clients reach their financial goals, mine come from cracking the mystery of how to communicate your information persuasively. I've developed my skill through a variety of experiences.


From my days as a reporter for a weekly mutual fund publication, I know that you've got to grab your reader's attention at the beginning of your story. I'll question you until I understand your "hook." I'm a skilled interviewer, having gotten my start asking questions in Japanese of elderly bureaucrats, politicians, and journalists in Tokyo before becoming a financial reporter. It's a heck of a lot easier to ask questions and record answers in my native English.


From my days working at Columbia Management and freelancing for leading investment and wealth management firms, I understand your industry and your vocabulary. Between real-life experience and the studies that led to earning my CFA charter, I know that if you talk about a bond's "duration," I've got to translate that into simpler language for the average investor.


From my days doing corporate training and public speaking, I've developed the ability to help you become a better writer and editor. It has been exciting to speak across the U.S. and Canada on "How to Write Investment Commentary People Will Read" for the CFA Institute. I also conduct customized training for companies.



From my days as a student, I retain my ability to organize information in logical order. That's helpful when I work on your articles, commentary, white papers, and other publications.


When my editing or writing enables you to communicate effectively with your clients, prospects, referral sources, and colleagues, that's my greatest thrill. I feel as if I'm giving you a voice as a writer that complements your skills as a financial professional and in-person communicator. That's the best reward of all.


Thank you for giving me the opportunity to enjoy helping you!
____________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Poll: What newsletter strategies work best for investment and wealth managers?

Newsletters are an important part of marketing for many investment and wealth management firms.

You've got lots of options. 

• Print newsletter vs. e-newsletter
• Quarterly, monthly or weekly frequency
• Market commentary and/or other topics
• Articles that you write yourself vs. articles written by a writer whom you hire, so they reflect your firm's views vs. articles that are mass-produced by a firm that sells the same content to others 
  

I'd like to learn your opinion on what works best. Please answer the poll in the right-hand column of this blog. 

Also, feel free to leave a comment below.
____________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Statistics to calm nervous investors: Research on dollar cost averaging

Are you--or your clients--nervous about buying stocks? You may find comfort in statistics from "(Re)Entering the Market: The Costs and Benefits of Dollar Cost Averaging" by Gregory D. Singer, director of research, and Ted Mann, analyst in Bernstein Global Wealth Management's New York office. Their article appeared in the CFA Institute's Private Wealth Management e-newsletter (August 2009).


The bottom line, according to the authors' research

...if you have a sum of money to invest for the long term, entering the market all at once will usually prove to be a better strategy than dollar cost averaging. The odds that you will reap greater wealth in the end are in your favor. But dollar cost averaging is reasonable insurance against the risk of investing in a falling market.

The authors highlight the downside of dollar cost averaging. "If the market rises while we are 'averaging in,' we miss out on potential gains. And those forgone gains could be substantial."


As evidence, they present average 12-month rolling returns for the U.S. stock market from 1926 to November 2008 for three strategies of investing a lump sum.

• Invest All at Once: 12%
• Dollar Cost Averaging: 8%
• Hold Cash: 4%

I find these numbers tremendously reassuring, even though past performance is no guarantee of future results. The case for investing all at once is even stronger following 12 months of a down market, with returns of 15%, 10%, and 3% respectively.


However, dollar cost averaging does preserve wealth during the bottom 20% of markets. In this bottom quintile, it "resulted in an average of 11.6 percent more wealth than investing all at once."  So it sounds like a great strategy for declining markets. The hitch? No one can reliably predict when those markets will occur.


Over the long run, investing all at once should outperform dollar cost averaging and holding cash.


The authors concede that investing entire lump sums immediately isn't for everyone. Their research suggests that the potential benefits from dollar cost averaging fall after the first six months. Moreover, "Beyond 18 months, averaging in doesn't make financial sense (unless it's part of a program like payroll deduction, where the money becomes available only over time)."


What do YOU think? When would you recommend investing lump sums all at once vs. dollar cost averaging?

__________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Behavioral Finance – A Three-Part Model for Client Relationships

Behavioral finance can deepen your client relationships during market turmoil, if you recognize your clients’ emotional right-brained reactions before you offer insights based on your analytical left-brained analysis. By applying a three-pronged process of Recognize-Reflect-Respond, you can adapt to new information in a thoughtful and effective framework.

Gayle H. Buff, president of Buff Capital Management, proposed this model in "Behavioral Finance: So What?" her June 15 presentation to the Boston Security Analysts Society (BSAS). Buff has 20 years of experience working with individual investors and is a past president of the BSAS. As a member of the CFA Institute’s Speaker Retainer Program, she has spoken about behavioral finance to CFA societies around the world.


Continue reading my article, "Behavioral Finance – A Three-Part Model for Client Relationships," in Advisor Perspectives.

What's a good elevator pitch for this blog?

Whether you're marketing your company, job hunting, or just networking, everybody needs an elevator pitch that succinctly conveys how they add value.

Even a blog needs an elevator pitch, says Darren Rowse of ProBlogger in "Write an Elevator Pitch for Your Blog."

Here's my elevator pitch for this blog:
The Investment Writing blog helps investment and wealth management professionals to communicate more effectively with their clients and prospects. The blog provides helpful communications tips and timely articles about industry topics.

How did I do with my elevator pitch? Do you have suggestions on how to improve it?

Also, if you're a blogger, please share your blog's elevator pitch along with a link to your blog..

 

_________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Financial services: An industry at odds with its clients

"Toward transparency and sustainability: Building a new financial order," a newly released study by the IBM Institute for Business Value raises some provocative questions about the relationship between financial services firms and their clients. 

Two big questions
1. Do financial services firms really put their clients' best interests first?
2.  Do financial services firms understand what their clients want?



Clients' best interests lose to financial services providers' 
"...providers offer products that serve their own best interests, rather than those of their clients," according to more than 60% of the institutional and retail investors and intermediaries surveyed by IBM.  

Almost half of the American industry executives surveyed--and about 40% of executives worldwide--agreed that providers' best interests get top priority. You can view graphs of the survey results on p. 10.



What do clients want? Financial services firms don't get it. 
Financial services firms think they know what clients want. Clients' top priorities are "best-in-class offerings" and "one-stop-shop," according to their survey results. They reckon that most clients would pay a 5%-15% premium for these characteristics.

But neither of these items cracks the top two in client survey results. In fact, in the IBM survey, clients rate "Unbiased quality advice/client service excellence" and "convenience" as their top priorities. Best-in-class offerings rank third and one-stop shopping comes in eighth. I do wonder if some survey participants may confuse "convenience" and "one-stop shop." I'm also curious about the make-up of the clients whom IBM surveyed.

You can view the providers' and clients' top 10 answers at the top of page 10. 

The survey results also lead IBM to suggest that financial services providers must segment their products accordng to how clients behave. "The ability to serve specific client clusters represents a major--and largely ignored--opportunity for the industry to make money," says the report.

"We have lost sight of the client in our own striving for outsized returns. We must get back to basics and focus to a far greater extent on our clients."--Global Head of Prime Brokerage, large U.S. bank

Related post: Research study: How financial services firms will make money in the future

_________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Research study: How financial services firms will make money in the future

The financial services industry can't continue to make money the way it used to. So the IBM Institute for Business Value tackled the challenge of answering the following questions:
*  Which forces are disrupting the industry? 
*  What will clients be willing to pay for?
*  How will the basis for competition change? 
*  And what steps should financial services firms take to prosper over the next three years?




Recommendations for a "new financial order"


You can read the researchers' answers in "Toward transparency and sustainability: Building a new financial order." As I see it, their answers boil down to a need for financial services firms to

1. Work with regulators to develop a system that hits the right balance between protecting investors and fostering financial creativity

2. Deliver on their promises to clients, including their promise "to focus on the interests of their clients"

3. Become more specialized, with a division between "beta transactors" and "alpha seekers"

On #1, the need for the right regulation, the executives surveyed by IBM anticipate "greater transparency and higher capital requirements,"IBM's analysis suggests seven elements for an appropriate solution (see p. 7).

As for #2 "... firms will need to become more cost-effective, manage risk more competently and move closer to their clients," says the report (p. 9). 

The specialization called for in #3 may result from unbundling. Although the industry executives surveyed by IBM favor the universal banking model,"the vast majority (89 percent) anticipate that overcapacity will ultimately result in some sort of unbundling" (p. 12).





Provocative ideas

"Most providers do not even realize what their clients actually want," says the report. So they'll struggle to meet their clients' needs.

Managing risk will require cutting costs because "the amount of risk [financial institutions] can underwrite relative to the capital they employ will be much lower.... Slashing headcount and closing business lines--the levers traditionally employed when the industry wants to save money--will not be enough" (p. 9). Companies must slash 20% beyond the savings they realize from divestitures and eliminating redundancies, according to IBM's analysis. It sounds as if firms have a lot more cutting to do.

_________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Focus on benefits, not features, in your marketing

Focusing on the benefits your clients will receive from your financial services is much more effective than touting your firm's features. In other words, focus on you, the client--not us, the firm.


I found a great example of this when I looked for gyms near me.


Gym 1 said, "Gym 1 is a premiere fitness, athletics, and rehabilitation facility that features the highest caliber trainers, equipment..."

Sounds impressive, doesn't it? But does it get you excited about joining a gym?


Now read the beginning of Gym 2's ad. 
     We've helped our members: 
     -fit into their clothes 
     -make their exes jealous
     -look amazing at their wedding


Sure, some people would opt for Gym 1 over Gym 2. But clearly Gym 2 makes more of an emotional connection with the reader.


You can find similar contrasts in wealth management. For example, one firm says, "Our company has been in business for 60 years." Prospective clients may read that statement and ask "So what? Why should I care?" They might re-word that as "Your money will be managed by a firm that has weathered up-markets and down-markets for 60 years."


How would you re-write "Our company has been in business for 60 years?" It would be great to get your suggestions.

_________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

How can I come up with ideas for a weekly newspaper column on personal finance?

That's the question a newly independent advisor asked me.

Before I offer some ideas, I'm going to challenge the idea that a newspaper column must be weekly. As newspapers decline, this advisor would be lucky to get into print once a month. But let's assume the paper DOES need a weekly column. How about offering to rotate authorship with three advisors who have different niches?  You'll reduce your burden and increase the range of topics covered by the column. That sounds like a win-win situation to me. If you know of anyone who's tried column-sharing, please leave a comment below. 

Once you've landed your column, here are some sources for ideas.
1. Questions your clients ask you
2. LinkedIn and other social networking sites--See what questions appear in LinkedIn's "Personal Finance" or other "Answers" categories. Pose a question in a social networking forum. For example, "What's your most pressing personal finance question?" or "What questions do you have about managing your 401(k)?"
3. Professional publications--Have you read an interesting article in Financial Planning, Advisor Perspectives. Financial Analysts Journal or some other trade publication? Talk about the topic in plain terms that regular folks can understand.
4. Newspapers, TV, and other media--It's especially good to pick a controversial topic.
5. Personal finance blogs--There are lots of good blogs out there. For a list of financial and econonmic blogs read by financial advisors, check out the list on page 3 of my article, "Investment Strategy Blogs Slow to Influence Financial Advisors."

Can you suggest more sources? Please leave a comment.

_________________

Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved

Madoff whistleblower Harry Markopolos speaks

You can see Harry Markopolos speak in the video excerpts that make up part of "One-On-One With Harry Markopolos: Validated, But Not Satisfied" on WBUR's website.

According to an editor's note, "More interview excerpts will be posted March 30 in conjunction with a special profile of Markopolos slated to air on Morning Edition."

Also, you can view the "60 Minutes" interview with Harry, including some clips from the BSAS Market Outlook dinner.

_________________
Susan B. Weiner, CFA
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Copyright 2009 by Susan B. Weiner All rights reserved