Client Communication: Defend Passionately

Defend performance and retain revenue is probably a buy-side problem emerged during the most recent financial crisis. Sell-side has only more explanations to do, but most of their job is done when capital is raised, stock sold, and the merger happened. But as a fiduciary asset manager, you have to engage another step where you have to deal with clients who are unhappy with the performance of their portfolios. 

A Wall Street trader once told me, the investment management industry is the most ridiculous industry of all. Who in the world would give you the money to manage and pay you for doing that, no matter you win or lose? And the next issue raised amid the financial crisis when everything went to shit is the debate on the whole “compared with the benchmark vs. absolute return” idea. If benchmark went down 20%, and you went down 15%, on a relative basis you’re still outperforming but essentially you are losing money for the client. 

But what will piss off a client even more is when they have several external managers, and one of them simply falls behind the other managers, regardless of the market direction. Every client-facing person in the asset management industry would have faced situations where you have to defend your portfolios as well as your firm’s reputation in the past two years. So how exactly do you do that? 

Explain what happened and what went wrong