Susan B. Weiner Investment Writing - Susan B. Weiner Blog

Institutional plan sponsors don’t know what the heck they’re doing when they make asset allocation decisions.

At least that’s the conclusion I’m tempted to draw after reading “Absence of Value: An Analysis of Investment Allocation Decisions by Institutional Plan Sponsors,”(subscription or membership may be required to access article) Financial Analysts Journal (Nov./Dec. 2009) by Scott D. Stewart, John J. Neumann, Christopher Kittel, and Jeffrey Heisler.

Plan sponsors’ poor product selection was responsible for most of the underperformance in the author’s study. As their abstract states, 

Results show that plan sponsors may not be acting in their stakeholders’ best interests when they make rebalancing or reallocation decisions. Investment products that receive contributions subsequently underperform products experiencing withdrawals over one, three, and five years. For investment decisions among equity, fixed-income, and balanced products, most of the underperformance can be attributed to product selection.

These poor decisions may be due to investment officers finding “comfort in extrapolating past performance when, in fact, excess performance is random or cyclical,” suggest the authors.

Should this research impact how plan sponsors manage their assets? I’d like to hear what you think.
____________________
Susan B. Weiner, CFA
If you’re struggling to pump out a steady flow of good blog posts, check out my five-week teleclass for financial advisors, “How to Write Blog Posts People Will Read,” and sign up for my free monthly e-newsletter.
Copyright 2010 by Susan B. Weiner All rights reserved

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

Credit scores are important in the financial lives of your clients, so I’d like to share a few tips I picked up at “Understanding Credit and Credit Risk Scores,” a presentation by Todd Overstreet, director of field sales and service at Rels Credit, the credit reporting agency for Wells Fargo, at the Women’s Business Network in Wellesley, Mass. on Jan. 8.

Overstreet gave many tips about how to minimize damage to your credit rating. The following particularly piqued my interest:

• Use less than 50% of your credit line. If you use more, creditors will start to worry about your ability to repay.
• Make all of your loan applications within a 14-day period if you’re shopping for loans. Each credit inquiry by a lender typically lower your credit score by three to five points. However, “If a consumer shops with five different mortgage lenders within a 1- day period, those five inquiries are grouped together and will only affect a consumer’s score 3-5 points total,” said Overstreet in an email to me.
  
• If you must close a credit card account, start with your newest card. Creditors like to see a long credit history.

Useful resources

• AnnualCreditReport.com will give you one free credit report annually from each of the three major credit reporting bureaus–Experian, Equifax, and TransUnion.
• OptoutPrescreen.com will take your name off the credit bureaus’ prospect lists, so you should stop getting credit card offers in the mail.
• MyFICO.com is a source for getting your FICO score. It charges a fee.
• CreditKarma.com is a free service for getting a credit score along with advice on how to improve your score. Maureen Conway of the accounting firm of Paresky Flitt & Company told me about this website.
• Understanding Credit and Credit Risk Scores is a 20+-page publication available as a .PDF file.

____________________
Susan B. Weiner, CFA
If you’re struggling to pump out a steady flow of good blog posts, check out my five-week teleclass for financial advisors, “How to Write Blog Posts People Will Read,” and sign up for my free monthly e-newsletter.
Copyright 2010 by Susan B. Weiner All rights reserved

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

Blog posts aren’t books. You only have time to make one major point per post.

In support of my thesis, I offer three quotes from The Elements of Story: Field Notes on Nonfiction Writing by Francis Flaherty, an editor at The New York Times.

• “A writer is like a gardener who knows one tree can serve as a focal point in a garden, but that many trees will just muck up the impact of each. Also, a good writer realizes that readers have the mental room to store just one large thought from a story,” pages 32-33.
• “A subject is not a story; it is many possible stories. To write is to choose, which is to exclude,” p. 33.
• “No detail belongs in a story if it doesn’t serve some role therein. As Chekhov said, don’t put a gun on stage in Act I if it doesn’t get used by the end of the play,” p. 37

What do YOU think of Flaherty’s quotes?

By the way, if you’re struggling to crank out a steady stream of readable blog posts, consider enrolling in my five-week teleclass for financial advisors, “How to Write Blog Posts People Will Read.”

Related posts
*  Five great writing tips: They’re not just for ads
*  Financial writers, lead with your message, not your source
*  Bloggers’ top two punctuation mistakes 
____________________
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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

I grapple with “overweight” at the end of every year and every quarter. 

It’s the kind of overweight measured in percentage points, not pounds. That’s because I’m writing performance reports for institutional mutual funds that may overweight or underweight sectors relative to the funds’ benchmarks.

I haven’t found any guidelines about how to write about these statistics, so I’d like to find out which wording you prefer for talking about a fund that has above-benchmark holdings in a sector.

1. Our overweight in
2. Our overweight position in
3. Our overweight to
4. Our overweighting in
5. Our overweighting to

Please answer the poll that will appear in the right-hand column of this blog until some time in February. I’ll report the results in my March newsletter.

If you can give a compelling reason why you favor specific wording, I’d also like to hear about that.

____________________
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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

Registered investment advisors (RIAs), if you control significant defined contribution (DC) assets, then mutual fund companies are hungry for your business and will do whatever they can to accommodate you. That’s the message I took away from “The 2010 Distribution Landscape,” at panel at the NICSA East Coast Conference on Jan. 14. The panel, which was moderated by Matthew Bienfang of TowerGroup, included Catherine Saunders of Putnam Investments, Daniel Steele of BNY Mellon Asset Management/Dreyfus Investments, and Bill Taylor of Pioneer Investments.

DC plan assets offer mutual funds very attractive profit margins and RIAs are a significant source of growth in this arena, according to Bienfang. For example, defined contribution investment-only margins average 25% vs. about 17% for retail and 15% for SMA (separately managed account) assets. 

Bienfang stressed that fund firms need to sell to RIAs as if they were institutions rather than individual investors. Fund firms must also ask RIAs how they can help them grow and manage their businesses. Then Bienfang asked his panelists to talk about how they’re targeting RIAs with DC assets.

BNY Mellon: Game changer is coming 
Once IRS Form 5500 requires the disclosure of advisor compensation for retirement plans, “This will be a game changer,” said BNY Mellon’s Steele. Advisors won’t be able to pick up business simply “by golfing with the CEO’s brother,” he said. Instead, the business will shift to specialists. As a result, his firm is seeking wholesalers with a technical background investment management and retirement. “Ideally you want both, but those people are rare,” he said.

Steele also mentioned that his firm is using collective trusts, which are an institutional, less expensive way to offer the same investment strategies available in the form of mutual funds. Collective trusts are even less expensive than ETFs. Of course, as I recall, they also lack some of the transparency of mutual funds. For example, their net asset values aren’t published by newspapers. 

Pioneer Investments: Open architecture is key 
Bill Taylor said the spread of open architecture in DC plans is helping fund firms such as Pioneer. He is adding portfolio consultants who can interact with gatekeepers about portfolio dynamics and how the firm’s funds fit in portfolios. 

Taylor also stressed follow-up. He said that many RIAs have complained about salespeople who’ll take them to dinner, but won’t send the materials they promise. It’s a cultural challenge for salespeople that customer relationship management systems alone aren’t enough to solve. 

Putnam Investments: Give RIAs what they want 
Cathy Saunders said she has learned that it’s important to call on RIAs the way they want to be called on. Communication via webinar and phone call can be just as effective as face-to-face, if that’s what RIAs want.

Saunders has found that many RIAs want to dig deep into the firm’s thought leadership and market outlook. They have a strong appetite to bridge the knowledge gap, she said. In addition, advisors from wirehouses are looking for business management tools and they want companies to support the tools they’re accustomed to using. 

Implications for fund firms

• Fund fees will fall because of increased competition, as Taylor noted.
  
• It’s important to segment RIAs. About 15% of RIA firms control 80% of the assets and 30% of the RIA channel is in the Northeast Corridor of the U.S., from Washington, D.C. on up, said Saunders.
• Target date funds (TDF), the most popular DC plan option, remain a barrier to entry for fund firms because 92% of TDFs are proprietary funds of recordkeepers. However, Taylor believes the open architecture will chip away at the dominance of proprietary TDFs. Steele said that in 2010 non-proprietary funds will finally surpass proprietary funds in DC plans.
  
• Providing incentives to sales people is difficult because of DC plans’ omnibus accounting, as Taylor and Steele noted. However, the situation is improves once a firm becomes a “premier provider,” Taylor said. He also noted that it’s important to get retail and retirement wholesalers to cooperate. Sometimes retail wholesalers want the retirement wholesalers to help the retail wholesalers’ RIAs to sell to DC plans when the retirement wholesalers are aware of other RIAs who are much better suited to DC sales.
  

Implications for advisors

• You’ll find more actively managed funds available for lower fees.
  
• Fund firms will take a more consultative approach to their interactions with you. Saunders said she has learned that it’s important to understand RIAs’ business models before deploying resources.
  

Related posts
* If you’re marketing to RIAs

____________________
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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

“…I hereby consign the shibboleth of ‘uncorrelated return’ to the scrap heap of asset allocation lingo, where it shall be available only to unscrupulous sellers, credulous buyers, and unschooled investment analysts.”

– Richard M. Ennis, executive editor, Financial Analysts Journal

These strong words from Ennis appeared in in his “Editor’s Corner” entitled “The Uncorrelated Return Myth,” Financial Analysts Journal (Nov./Dec. 2009). 

Ennis asserts that “The notion of the existence of ‘uncorrelated return’ assets with handsome risk premiums flies in the face of financial theory and conflicts with empirical evidence.” 

When he says “financial theory,” Ennis is referring to the capital asset pricing model, which accords positive risk premiums to market-correlated assets. He also says that evidence shows that so-called uncorrelated assets such as real estate, hedge funds, and private equity are actually highly correlated with the stock market.

What do YOU think about this topic?

____________________
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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

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.

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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

The economy is on a rebound, but it’s a long way back to normal, said David P. Kelly, chief market strategist, J.P. Morgan Funds, to NICSA’s East Coast Regional Meeting on Jan. 14, 2010. 

A Jupiter of a recession
Economists have seen recessions like 2008-2009 before. so they can predict the broad shape of the economic recovery, according to Kelly.

U.S. recessions are just like the solar system. There are big planets and little planets, but no medium planets, said Kelly. “This was a Jupiter among recessions,” said Kelly. Even though it’s the largest recession since World War II, it’s not unprecedented. In fact, it’s not that different in size from the recessions of 1957, 1980, and 1982. As a result, he foresees a robust recovery.

“The bigger the recession, the bigger the bounceback,” said Kelly. 

Keys to U.S. economic growth 
The U.S. economy will rebound strongly because the following areas became so weak, they must bounce back, said Kelly.
1. Auto consumption
2. Residential construction
3. Equipment
4. Inventories 

Employment outlook 
Kelly made the following predictions

• Jobs will begin to grow in the first quarter of 2010, which will produce income to support economic expansion.
• Unemployment will rise as new jobs are created. This is because unemployment statistics are calculated using the number of people actively seeking jobs. People will return to the market as they see better prospects for success.
• It’ll take five years to get back to full employment. Employment may rise to 9% by year-end 2010. 

More predictions by Kelly

• Corporate profits will improve. This is because of low costs, low interest rates, and especially because of the lack of upward pressure on wages. On the wage issue, Kelly quoted the singer Beyonce, saying that employees realize that employers know “I can have another you in a minute.”
• The risk of deflation is greater than the risk of inflation.
• The biggest risks to Kelly’s positive scenario are conflict with Iran, which would drive up oil prices; and  banks finding it difficult to lend due to regulation, taxes, and uncertainty about regulation and taxes.

Opportunities 

• It’s not too late to get back into stocks. Some people worry that maybe they “missed the train.” Davis’ reply? “This is a very long train on a very long platform.” He noted that stocks have recovered less than half of what they lost during the bear market. Also, there’s a lot of cash on the side lines that will eventually flow back into the stock market. On the flip side, bonds have become more risky, so now is a good time to overweight stocks relative to bonds, he said.

• Non-U.S. economies will continue to outperform the U.S., and international stocks are cheaper than U.S. stocks. Also, a modest fall in the dollar will amplify gains somewhat for U.S. investors.
• During Q&A, Kelly said, “I think buying a house will turn out to be a good investment, even over the next five years.”
• On the topic of gold, Kelly said he wouldn’t put his mother into gold, even though the gold bubble has the potential to continue. The fundamentals don’t support gold’s price rise in 2009 because gold is supposed to appreciate in times of rising volatility and rising inflation. Meanwhile, volatility, as measured by the VIX has fallen and so has inflation. This bubble will eventually pop, he said.

Interesting graphs supported Kelly’s presentations. Financial advisors who participate in the J.P. Morgan’s Market Insights program can find the graphs in the firm’s quarterly Guide to the Markets.
____________________
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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

Good writing uses strong verbs. Strong verbs are usually short. Thus, I strongly dislike the word “mitigate.” In fact, I can’t think of any time that I’d use mitigate instead of a synonym.

Some of my favorite synonyms for “mitigate” in the context of an investment or wealth management article include 
*  Cut
*  Ease
*  Reduce

Can you think of a case where it would be essential to use “mitigate” instead of a synonym? I’d like to know.
____________________
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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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

I got rhythm, I got music…Who could ask for anything more?                                         

Rhythm isn’t only useful for Gene Kelly tap dancing to “I Got Rhythm” in An American in Paris. It also can also energize your writing about investment or wealth management.

Writers in our industry are prone to writing long, long sentences. One way to improve your rhythm is to insert some short sentences amid the long ones. Or even to start your article with some.

Here’s an example that caught my eye.

Reduce the growth of health care costs. Bend the curve. Find the game changers. Reform the delivery system.

Yawn.

This is how David Leonhardt of The New York Times started his “Falling Far Short of Reform,” a column about health care reform.

The sentences in Leonhardt’s introductory paragraph run four to seven words in length. If the sentence length of his entire article averaged five words, you’d get bored. The repetitive rhythm would start to work against him. In small doses–or interspersed among longer sentences–they are easy for readers to absorb. 

I also like the humor of “Yawn.” It makes it easy for the casual reader to relate to the article.

You might apply Leonhardt’s construction to something you write. Let’s say you want to tear down some of the classic assumptions about portfolio management. You could start as follows:

Asset allocation. Diversification. Buy-and-hold.


Yawn.

Your advisor has been telling you this story forever. But now that you’ve been through the stock market meltdown of 2008-2009, it’s time to take a fresh look at how to manage your portfolio.

I tweaked Leonhardt’s technique slightly by using sentence fragments. That’s okay in moderation. Please try this technique and tell me what you think about it.

Related posts
*  Grab readers with an anecdotal lead
*  Financial writer’s clinic: Great title, lousy intro 
*  Vary your paragraph length like NYT writer Floyd Norris

____________________
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

_______________________________________________________________
Need to write better? Register for my next class on “How to Write Blog Posts People Will Read: A 5-Week Writing Class for Financial Advisors” starting May 16. You won’t get another chance to take this class until 2013.

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