Ideas...for helping investment managers win and retain assets
Ideas...for helping investment managers win and retain assets
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Client Communications in a Period of Risk, Uncertainty and Volatility
October 2011

It is game time with your clients and the proverbial stakes are high. With the 2008 credit crisis still very fresh in our minds, we just experienced one of the most volatile quarters on record. And the Euro-land crisis...with its fear-provoking implications...shows no sign of ending.

Against this backdrop, fund sponsors are understandably anxious and acutely interested in what their managers have to say. They want to know that their managers understand and are managing portfolio risks.

In response to the continuing period of risk, uncertainty and volatility, some institutions appear to be re-positioning their investment portfolios. High Quality Dividend strategies, “Risk First” strategies, and Tactical Outsourcing are but a few of the strategies garnering newfound press and attention.

Times like these present an excellent opportunity for strong communicators to evolve from product vendors to trusted advisors with their clients....with all the beneficial accoutrements. Capitalizing on this opportunity comes down to how well you communicate both within your role and beyond your role.

Communicating Within Your Role

What has happened?

Have you developed strong executive summaries that explain how recent risk, uncertainty and volatility are affecting each specific investment strategy? That's the first thing clients and consultants want to know. And, importantly, without strong executive summaries, your staff may have trouble delivering the same, consistent message to clients, prospects and consultants.

What, if anything, has changed?

Consultants and fund sponsors also want to know what, if anything, has changed?

Representative questions they may have
...about the overall space in which your strategy operates:
  • Are market conditions particularly abnormal and if so how?
  • Have correlations changed - either within or across asset classes?
  • Have natural players in your space been compromised? If so, what is the affect on supply/demand?
...about your specific strategy:
  • Are things "business as usual" or not?
  • If not, what specific process and/or portfolio changes have been made and why?
  • Should your strategy be expected to perform or behave differently looking forward?


What might happen?

While it may be unfair to expect you to predict specific shorter-term risk events it is critical to demonstrate that you are prepared for them! Demonstrating this gives clients great comfort. Not demonstrating this may leave clients with concerns that something is missing. This ties straight to both your risk management capabilities and your ability to communicate risk management concepts without confusing people.

Your client communications are lacking if you can’t clearly and understandably boil each strategy down to:
  • The two or three main risks and/or potential outcomes that most concern you
  • Your current exposure to such risks
  • What would happen to the client’s portfolio should said risks occur, and
  • Actions you have taken to protect principal should said risks occur?
Are there examples of similar past periods that apply to today’s situation?

If so what lessons were learned? Why might things be different this time? What, if anything, is consensus missing that you see? How are clients benefiting from your experience in similar environments?

Are opportunities arising from the Euro crisis?

As we emerged from the 2008-09 credit crisis many tactical opportunities surfaced. Are tactical opportunities surfacing now in a similar fashion? If so, are you prepared to communicate them to clients?

Perhaps certain securities or sectors have over-corrected that in reality have limited exposure to the Euro crisis? How can you help your clients profit from such opportunities? What are the risk/reward tradeoffs?

Have you identified and built your communications around the one most important thing for your clients to understand?

As a final checkpoint before going live, ask yourself if the piece you are writing or the meeting for which you are preparing will accomplish this.

There may not be clear consensus about what that one most important thing is. If so consider polling relevant staff with this question and their reasoning. Poll results may surprise you and will yield great insights for writing client communications.

Are your client communications understandable and in English (not Techno Speak)?

Can laymen understand what you are saying? Are your communications concise or are they overwhelming clients with too much technical detail? Do you have strong writers on staff with the right investment knowledge and access to portfolio managers to serve as a buffer between investment professionals and clients?

Communicating Beyond Your Role

Have you asked clients how their portfolio strategy, needs or preferences are changing?

Again, an upside to the current challenging period is that it may kindle opportunities for attentive investment managers. Ask clients if overall portfolio-level strategy has changed and if so in what ways? What is the underlying objective? What are they looking to accomplish?

For example, some investors are bolstering their liquidity positions to protect against the risk of another global crisis. If clients see you as a future source of liquidity, portfolio repositioning may be needed.

Other clients are shifting their equity and fixed income portfolios toward more conservative strategies. How does this impact your client relationships? What opportunities and threats might arise for you?

Have you looked at current events through the lens of your client?

First, do you know each client well enough to do this? Do you know the overall allocation, funded status and risk/return goals for the entire fund...even if you only manage a portion? Based on this knowledge, you might be well-positioned to tell clients about interesting tactics and strategies other clients are implementing.

Are you getting enough quality one-on-one time with key clients?

Webinars and other group sessions can be extremely effective...no doubt. But this is a critically-important time to meet one-on-one with your key clients. As mentioned earlier, in response to continuing volatility and growing resignation that we are in a prolonged new normal environment, many are thinking about re-positioning investment portfolios. What can you do to gain valuable face-time with clients this quarter?

Consider an EDH Client Feedback Study

In our 25+ year careers, there has never been a better time to gain feedback from clients. Change is in the wind... portending opportunities and threats for investment managers.

EDH has the resources and process in place to quickly and economically evaluate how your clients are reacting to this period of risk, uncertainty and volatility...including their interest in new strategies. And as in any market environment, an EDH Client Feedback Study will improve your client retention and share of wallet by identifying problem accounts, addressing client issues before they become acute and uncovering cross-sale opportunities.

Let EDH help you with your complex communications challenges

Do you have strategies with risk management concepts that are particularly hard to communicate without confusing people? Or maybe you have an investment strategy with a hard to understand process and you need help explaining it more effectively. EDH is the best in the business at surmounting these types of communications challenges.

Join Our Mailing List
Name*:
Title:
Organization*:
Email*:
Phone*:
  *required field
Client Communications in a Period of Risk, Uncertainty and Volatility
October 2011

It is game time with your clients and the proverbial stakes are high. With the 2008 credit crisis still very fresh in our minds, we just experienced one of the most volatile quarters on record. And the Euro-land crisis...with its fear-provoking implications...shows no sign of ending.

Against this backdrop, fund sponsors are understandably anxious and acutely interested in what their managers have to say. They want to know that their managers understand and are managing portfolio risks.

In response to the continuing period of risk, uncertainty and volatility, some institutions appear to be re-positioning their investment portfolios. High Quality Dividend strategies, “Risk First” strategies, and Tactical Outsourcing are but a few of the strategies garnering newfound press and attention.

Times like these present an excellent opportunity for strong communicators to evolve from product vendors to trusted advisors with their clients....with all the beneficial accoutrements. Capitalizing on this opportunity comes down to how well you communicate both within your role and beyond your role.

Communicating Within Your Role

What has happened?

Have you developed strong executive summaries that explain how recent risk, uncertainty and volatility are affecting each specific investment strategy? That's the first thing clients and consultants want to know. And, importantly, without strong executive summaries, your staff may have trouble delivering the same, consistent message to clients, prospects and consultants.

What, if anything, has changed?

Consultants and fund sponsors also want to know what, if anything, has changed?

Representative questions they may have
...about the overall space in which your strategy operates:
  • Are market conditions particularly abnormal and if so how?
  • Have correlations changed - either within or across asset classes?
  • Have natural players in your space been compromised? If so, what is the affect on supply/demand?
...about your specific strategy:
  • Are things "business as usual" or not?
  • If not, what specific process and/or portfolio changes have been made and why?
  • Should your strategy be expected to perform or behave differently looking forward?


What might happen?

While it may be unfair to expect you to predict specific shorter-term risk events it is critical to demonstrate that you are prepared for them! Demonstrating this gives clients great comfort. Not demonstrating this may leave clients with concerns that something is missing. This ties straight to both your risk management capabilities and your ability to communicate risk management concepts without confusing people.

Your client communications are lacking if you can’t clearly and understandably boil each strategy down to:
  • The two or three main risks and/or potential outcomes that most concern you
  • Your current exposure to such risks
  • What would happen to the client’s portfolio should said risks occur, and
  • Actions you have taken to protect principal should said risks occur?
Are there examples of similar past periods that apply to today’s situation?

If so what lessons were learned? Why might things be different this time? What, if anything, is consensus missing that you see? How are clients benefiting from your experience in similar environments?

Are opportunities arising from the Euro crisis?

As we emerged from the 2008-09 credit crisis many tactical opportunities surfaced. Are tactical opportunities surfacing now in a similar fashion? If so, are you prepared to communicate them to clients?

Perhaps certain securities or sectors have over-corrected that in reality have limited exposure to the Euro crisis? How can you help your clients profit from such opportunities? What are the risk/reward tradeoffs?

Have you identified and built your communications around the one most important thing for your clients to understand?

As a final checkpoint before going live, ask yourself if the piece you are writing or the meeting for which you are preparing will accomplish this.

There may not be clear consensus about what that one most important thing is. If so consider polling relevant staff with this question and their reasoning. Poll results may surprise you and will yield great insights for writing client communications.

Are your client communications understandable and in English (not Techno Speak)?

Can laymen understand what you are saying? Are your communications concise or are they overwhelming clients with too much technical detail? Do you have strong writers on staff with the right investment knowledge and access to portfolio managers to serve as a buffer between investment professionals and clients?

Communicating Beyond Your Role

Have you asked clients how their portfolio strategy, needs or preferences are changing?

Again, an upside to the current challenging period is that it may kindle opportunities for attentive investment managers. Ask clients if overall portfolio-level strategy has changed and if so in what ways? What is the underlying objective? What are they looking to accomplish?

For example, some investors are bolstering their liquidity positions to protect against the risk of another global crisis. If clients see you as a future source of liquidity, portfolio repositioning may be needed.

Other clients are shifting their equity and fixed income portfolios toward more conservative strategies. How does this impact your client relationships? What opportunities and threats might arise for you?

Have you looked at current events through the lens of your client?

First, do you know each client well enough to do this? Do you know the overall allocation, funded status and risk/return goals for the entire fund...even if you only manage a portion? Based on this knowledge, you might be well-positioned to tell clients about interesting tactics and strategies other clients are implementing.

Are you getting enough quality one-on-one time with key clients?

Webinars and other group sessions can be extremely effective...no doubt. But this is a critically-important time to meet one-on-one with your key clients. As mentioned earlier, in response to continuing volatility and growing resignation that we are in a prolonged new normal environment, many are thinking about re-positioning investment portfolios. What can you do to gain valuable face-time with clients this quarter?

Consider an EDH Client Feedback Study

In our 25+ year careers, there has never been a better time to gain feedback from clients. Change is in the wind... portending opportunities and threats for investment managers.

EDH has the resources and process in place to quickly and economically evaluate how your clients are reacting to this period of risk, uncertainty and volatility...including their interest in new strategies. And as in any market environment, an EDH Client Feedback Study will improve your client retention and share of wallet by identifying problem accounts, addressing client issues before they become acute and uncovering cross-sale opportunities.

Let EDH help you with your complex communications challenges

Do you have strategies with risk management concepts that are particularly hard to communicate without confusing people? Or maybe you have an investment strategy with a hard to understand process and you need help explaining it more effectively. EDH is the best in the business at surmounting these types of communications challenges.

Join Our Mailing List
Name*:
Title:
Organization*:
Email*:
Phone*:
  *required field