Date: 19.04.17 Category: Working For Change
Left: Ben Kottler, CFA – Institutional Portfolio Manager, MFS Investments
Right: Serge Pépin, CIMA – Investment Specialist – European Equities, BMO
What you think is the biggest problem for the investment profession when it comes to communication?
Ben: In many professions you have a lot of smart, well educated people and when you put smart, educated people together they come up with a lot of jargon, and people just fall into that. Outside of the profession we’re dealing with individuals and trustees, many of whom may also be smart and educated, but dealing with investments is a very small part of what they do. The problem is that often they don’t understand what we are saying. It’s very easy to bamboozle people with jargon. We think there is a lot that can be done to demystify the language of investing, and if you’re able to do that, it will help people make the right decisions.
Serge: There is definitely an element of that. When I’m attending industry seminars and workshops, I find it’s very insulated; it’s our little world and we think there’s nothing else around it. We fall into that trap of trying to sound more intelligent than the next person. We want to be put on a pedestal more than anything else, “Look at me, I know so much about markets.” We need to bring down the jargon a couple of notches and understand the world doesn’t revolve around us, but it does revolve around financial services, because pretty much everybody uses those services. The problem is that few understand what we are doing and are able to make proper decisions. I don’t think the way we talk serves anyone very well.
So you don’t think clients understand what fund managers do?
Serge: No. Sometimes I don’t even think my parents understand what I do! What’s important to people like them is that in retirement they can have a roof over their heads and three square meals a day and that’s about it. And that view applies to about 90% of the population out there. At the end of the day our clients just need to make sure they get the performance they need. This is especially important when so many are outliving their money and going to work at Walmart at the age of 75! I think there is so much we can bring to the community if we try to let them understand about the financial world.
Do we dwell on too much detail?
Ben: It’s easy to get immersed in looking at individual businesses and stocks, and it’s difficult to step back and think about the basic principles of investing: compounding returns over time, avoiding costs, diversifying assets. These are things that should matter to clients more than the minutiae of all the individual decisions we make every day.
Serge: And it’s often at the sales stage that the problem occurs. When you are filling out an RFP you often take up 50 pages saying what you could easily say in one page. You are trying to impress but it doesn’t really get you anywhere. We are muddying the waters where we don’t really have to.
Do fund managers in particular struggle to communicate?
Ben: I think there is a desire to appear important and to sound smart. I sometimes meet with young people who are thinking about finance as a career and yet to them the whole thing is impenetrable. The advice I give is to read a well written publication like the Financial Times. In there you will find that people who write well do so in a straightforward and transparent way.
What are the suggestions that your committee is thinking of putting forward?
Ben: While we would encourage our profession to communicate more clearly, where we think we can help is with the issue of financial literacy and two ideas have come from this. The first is that we try and produce some documents that can be used by both personal and professional investors. These would be educational documents that get back to basics, explaining simple topics without the use of jargon – like the value of diversifying assets – in a short fact sheet. We came across some great material by the CFA Society of Montréal so we don’t need to reinvent this, but we do need to adapt them for use in the UK.
Serge: The second idea we have is about getting members involved in the community. There are a number of charities across the UK who work in building up financial literacy. We want to create a hub of those charities so that the CFA members can tap into it and work for them for a couple of hours here and there. In the end it’s all about bringing knowledge to young people who will be senior citizens one day, and hopefully financially well-educated senior citizens.