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

You don’t agree on how to define outperformance by stock funds, the focus of my latest poll. You expressed your disagreement in votes as well as in your comments on my blog post, some of which I’ve quoted verbatim below.

Outperformance poll results

Almost 30% of you said that an advantage of even one basis point (0.01%) was enough for an investment to claim outperformance. Close to 20% put the break point at 10 basis points (bps). Overall, more than two-thirds of you said there was an absolute level at which asset managers could claim outperformance.

For the rest of you, it seemed that outperformance was relative. Twelve percent defined an investment’s outperformance in terms of “a certain percentage of its benchmark.” The rest of you–21%–said outperformance was defined by “None of the above.”

Here are the poll answers and the percentage replies:

* 1 basis point (0.01%): 29% of all votes
* 10 bps: 18%
* 25 bps: 0%
* 50 bps: 6%
* 100 bps: 15%
* A certain percentage of its benchmark’s return: 12%
* None of the above: 21% (Percentages may not total 100 because of rounding)

The minimalists’ approach

“Technically, a mere 1 bp excess return should arguably count for ‘outperformance,’”wrote David Spaulding of the Spaulding Group in his comment on my blog. His comment was echoed by Jeff McLean, Ph.D., who said, “I believe that a stock, fund, or variable annuity that outperforms a benchmark by any margin, no matter how small, can claim outperformance.”

Consider the benchmark

John Lowell said he’d like a manager’s performance to exceed the benchmark by at least one standard deviation, but preferably 1.5 standard deviations, before he applied the term outperformance. “To really be outperforming, I’d like to see them outperform by at least 1 standard deviation 3 years out of 5 and cumulatively over the 5-year period.”

Some of you who commented on my blog took issue with the idea of comparing performance net of fees with the performance of a benchmark that’s not reduced by fees. Here’s what Frazer said:

For example, if you have a fund with a 50BPs expense ratio being compared with the SP500 (which investors can access via ETF with an 8BPS expense ratio), you should subtract the fees from both numbers to get an accurate view of relative performance by the manager.

In this case, the fund would need to outperform the SP500 by 42BPS to claim “outperformance” over the benchmark.

I imagine that the SEC doesn’t like this approach. What marketer wouldn’t do this if it were legal?

Then, there’s the issue of what benchmark to use. Steve Smith said, “Leaving aside the degree of outperformance, two baseline criteria are also required: 1) choosing the proper benchmark (i.e. “best fit” index) and 2) having a very high (mid-90%) R squared.”

Remember the client

The financial advisors who responded to my poll said that “outperformance” is meaningless if client goals aren’t considered.

David B. Armstrong, CFA, said

I define outperformance as this – when an investor’s portfolio does better then the return required by the financial plan to meet the investors goals – that’s outperformance.

Moderately outperforming the return required in a financial plan is probably ok – most investors can get away with that safely from time to time. It’s when your outperformance is like going 95 mph in a 65 mph zone that investors have a problem. How many investors experienced a ticket or a wreck in their portfolios in late 2008? Or better yet – how many advisors sat in the back seat of the car and let their clients drive 95 mph…drunk!

Stephen Campisi, CFA, agreed, saying “…outperformance is really not about return; it’s about having more money than you need to meet your tangible financial goals.”

Campisi also suggested that fiduciary responsibility comes into play. “As fiduciaries, we need to start thinking in terms of our loyalty standard, and start thinking about meeting the client’s financial goals – and these are money goals. So, we need to “show them the money” and when we talk about return we need to show them an internal rate of return over a long period. We need to show them the return that incorporates their beginning wealth, the money they were able to pull out of the portfolio for their goals, and their ending wealth. Then (and only then) will we be acting in the best interests of the client.”

My take on this issue

I like the idea of defining outperformance relative to client goals. This is an area where financial advisors and asset management firms focused on separate accounts can improve. However, if you’re a fund company producing investment performance reports for a diverse group of investors, you lack information about client goals. So you’ve got to define outperformance relative to a benchmark.

Thank you, commenters!

I’m grateful to everyone who commented–both on my blog and in a lively discussion on the members-only Financial Writing/Marketing Communications LinkedIn Group. You made me see new dimensions to this issue. I love learning from you.

Thank you–and please continue the conversation!

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The Firefox browser’s spellchecker keeps tagging “outperformance” as a typo. I feel very annoyed when this happens because I believe it’s wrong.

The case for “outperformance”

Here’s the evidence in favor of marrying “out” and “performance” so they’re one word:

1. “Generally do not hyphenate when using a prefix with a word that starts with a consonant,” says The Associated Press Stylebook. Note: I’m using the 2007 version of the AP Stylebook.
2. Words into Type agrees, saying “The modern tendency is to eliminate the hyphen between a prefix and a root unless the root is a proper noun or adjective, such as un-American.”
3. Google brings up about 1.2 million examples for “+fund +outperformance” vs.fewer than 700,000 for “+fund +out-performance.”

The case for “out-performance” with a hyphen

I mustered one piece of  evidence in favor of hyphenating “out-performance.” Google yields more than 931 million search results for “out-performance” vs. only 1.01 million for “outperformance.” It’s strange that the first four results use the spelling “outperformance,”as you see in the screen shot on the left.

Please answer my spelling poll

What’s YOUR opinion on this topic? Please answer the poll in the right-hand column of this blog.

How do YOU spell it?

• Outperformance
• Out-performance
• Out performance

_______________________________________________________________
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.

Best practices for institutional asset manager websites don’t get as much attention as retail sites in the blogosphere. So I’m asking all you seasoned institutional marketing experts to help compile a list of best practices.

In this post, designer Margaret Patterson offers tips on firm-specific information, educational content, and search optimization for institutional investment management websites. Read on for the details of Patterson’s suggestions.

Firm-specific content

In addition to the basics, include the following, suggests Patterson:

1. A complete “Executive Experience” organization chart, clearly featuring all analysts and their areas of expertise
2. A client list, but only after getting permission from each of them
3. Use each search optimization word or phrase at least twice somewhere in your website.

Educational content

Small institutional investors appreciate education, says Patterson. For example, a glossary of terms and analytical definitions, such as free cash flow, operating cash flow, etc.

Here are more of Patterson’s content recommendations:

1. Downloadable white papers are a big draw. For example, “Actively Managing Bonds vs. Laddering: Pros and Cons.”
2. Consider offering email market and industry commentaries PDF files.  Google searches favor sites that have been recently altered. Regularly adding new documents improves the odds that Google will lead potential investors to your site.

Special content for special targets

Provide a page or two of content for institutional consultants, suggests Patterson. “For example, a liability-driven approach or exceptional reporting capabilities, when applicable, are music to their ears. I push service, service, service when consultants are among those being pitched.”

If you have questions for Patterson, you can email her at mpco@verizon.net.

Please help add to this list.

Use the “comment” section below or email your suggestions for best practices to
info@investmentwriting.com.

_______________________________________________________________
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.

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“I can’t get a job because I don’t have a book of business.”

I’ve heard many CFA charterholders in the field of wealth management say their career prospects are limited by their lack of clients who will follow them to a new employer. If you’re in this fix, I have some suggestions for you, thanks to a lively discussion on the CFA Institute’s LinkedIn Group. I’ve quoted only LinkedIn Group members who gave me their permission.

The wealth manager’s dilemma

Sometimes your technical skills aren’t enough to attract potential employers, especially now.

“When the times are good, the industry will place more value on the technical skills because of more demand for labor. When the times are bad, the industry will place more value on soft skills because of more demand for assets to manage in order to pay for labor,” says James H. Barker, Jr., CFA, managing director of Haynes Barker Investment Management in Tennessee.

The skills necessary to earn your CFA charter and to manage money for individuals and families won’t build your client base. At least not overnight. So what can you do if you need a job, but lack that all-important “book”?

In the near term, you can pursue one of the following courses.
1. Look for a company–most likely a large company–that hires specialists.
2. Become a consultant or start your own business using your analytical skills.
3. Become a great networker and marketer.

Career strategy #1: Work for a large company

If you want to focus solely on your technical skills, look for a company–most likely a large company–that hires specialists.

Ted Everett, CFA, a fellow Boston Security Analysts Society member, says “Larger firms accept a higher rate of turnover in clients as a necessary evil of their firm size but offset it with efforts by dedicated sales teams. They are more apt to add personnel to fill a gap in coverage without the portfolio manager having to bring a book with him/her. ”

Barker says, “Small companies will desire their employee/owners to be proficient with both technical and soft skills. Large companies will desire their employees to provide skills for what each is specifically hired for. To survive the bad times with a large company, you better have a book of business or the ability to communicate effectively to retain business and build for the future.”

Career strategy #2: Start your own business

You can become a consultant or start your own business using your analytical skills. This will require some marketing–but not necessarily asset-gathering–skills. However, consulting and some businesses don’t require as much of a “book of business” as a wealth management company would seek.

I know some consultants who work for only one client at a time. It’s a lot like having a regular job. The downside? These consultants are always looking for the next gig–or they have down time when they’re not making money. I’ve experienced this at times as a freelance writer. It helps to have an emergency fund to tide you over.

Here’s what David Malone, CFA, a fellow Boston Security Analysts Society member, says about his business.

I have found that without my own book, I cost too much, at least today. To solve this problem I started Wintergreen, which focuses on stock research versus asset-gathering. If a CIO is under cost pressure and cannot hire enough staff, I can fill the temporary stock picking needs on a contract basis.

This eliminates my need to gather assets and allows me to focus on what I love. I enjoy networking and informing CIOs and other managers that I can help them.

Career strategy #3: Become a great networker

If you hone your networking skills, you’ll be in touch with the right people once the right job becomes available. You’ll also have a better shot at developing the all-important book of business.

“Part of the answer, in my opinion, is to work on networking and telling one’s own story. This is not comfortable for many of us, but it is the only way to really participate in the market for knowledge work,” says David Robertson, CFA, CEO of Arete Asset Management in Baltimore, Md.

Other CFA charterholders recommend the following:

• Taking public speaking or sales classes–I notice the New York Society of Security Analysts sponsors free Toastmasters meetings
• Giving talks or seminars
• Joining a chamber of commerce or other local organizations
• Going wherever you can to meet prospective clients and referral sources

Should the CFA Institute and local societies play a larger role?

Several LinkedIn Group members suggested that the CFA Institute should more actively publicize the value of the CFA credential for wealth management. There’s also interest in local CFA societies helping members to develop their soft skills.

_______________________________________________________________
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.

Who are you writing for? Answer this question correctly and you’ve taken a big step toward writing a successful blog post, article or other communication.

When novelist Michael Cunningham asks this question of his students, 90% say they write for themselves. Cunningham thinks they’re missing an important point.

“…writing is not only an exercise in self-expression, it is also, more important, a gift we as writers are trying to give to readers,” says Cunningham in “Found in Translation,” an essay that appeared in The New York Times on Oct. 3, 2010.

Read Cunningham’s op-ed story about Helen to gain a better understanding of why and how your reader matters.

I agree with Cunningham’s assertion that for authors “It had better be apparent, from the opening line, that we’re offering readers something worth their while.”

_______________________________________________________________
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.

You’re a potential client if your investment or wealth management professionals have interesting ideas that appeal to your clients, prospects, and referral sources. Your only problem: You, your staff, and the financial professionals just don’t have the time—or maybe the skill—to put them into writing persuasively.

This is where I come in. I can interview your subject matter experts, review research materials, and write a piece your company can publish under its name. If you prefer, I can edit your draft. Or even teach you how to do it yourself.

You may benefit from my writing, editing, or training services if you are a marketer or communicator for

• Financial planners or financial advisors
• Investment managers
• Wealth managers
• Vendors to any of the above

What you want to write–and how I can help

If you are bursting with ideas, I can turn them into

• Articles
• Blog posts
• Investment commentary
• Sales letters
• White papers
• Many other formats

If you want to write a piece—or improve your draft—you have several options. You can hire me to

1. Interview your experts and write your piece
2. Turn source materials you provide into a polished piece
3. Use a combination of methods 1 and 2

When you contact me, ask for the graphic of my typical writing process. You’ll get a better idea of how we can work together.

I have experience writing, ghostwriting, and editing the following types of publications:

• Articles
• Blog  posts
• Case studies
• Internal communications
• Institutional performance commentary
• Mutual fund annual and semiannual reports
• Newsletters
• Press releases
• Product sheets
• Sales letters
• Web pages
• White papers

Why Susan?

• Your content will attract a bigger audience because the value you provide will be highlighted in reader-friendly text.
• You receive your finished product quickly and on schedule. Having worked as a staff reporter for a weekly trade publication, I understand the importance of deadlines.
• You don’t have to explain yourself in endless detail because I understand your industry. I’m a CFA charterholder who can use language as a financial professional and a journalist.

Contact me today to learn more! You can also check my testimonials on LinkedIn.

_______________________________________________________________
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.

White papers are popular with businesses small and large. However, they don’t all define “white paper” the same way.

Help me learn how YOU perceive white papers by answering the three-question survey below.

I’ll report on the results on this blog.

Thank you for your help!

FEB. 22 UPDATE: The survey has closed. I’ll review the results and post about them during the next week or so. Stay tuned!

_______________________________________________________________
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.

A business plan can help you launch your new financial advisory or investment management business so it’s destined for success. Or it can help you ratchet up the growth of a business that’s lagging.

Gwen Moran, co-author of The Complete Idiot’s Guide to Business Plans, said, “The process of mapping out a business plan can save time and money while helping financial planners identify potential opportunities or pitfalls. The process of running a business can be a frenetic experience. It is only when we take ourselves out of the day-to-day and look at the direction and needs of the business that we get a clearer vision of the best next steps.”

Here are some low-cost resources for business plans.

1. “Two Page Mini Business Plan”

Brian Plain (@oakparkplanner) said, “Check out @ProsperousCoach Mini Business Plan template. I used it for my 2011 plan &… liked it.” The formal name of this plan is the Two-Page Mini Business Plan. It’s offered by Suzanne Muusers of Prosperity Coaching. Suzanne coaches financial advisors and has guest blogged for me about “The Lost Art of the Thank You Card.”

2. Financial marketer Kristen Luke’s blog

Kristen Luke’s blog, Financial Marketing Wire, doesn’t offer a formal business plan. But you’ll find a wealth of practical advice on her site, including some useful worksheets.

3. “Professional’s Planning Procedure”

A Twitter friend recommended Professional’s Planning Procedure from Kinder Brothers International (KBI). The KBI website describes this 20-page publication as “An extremely practical and positive, step-by-step guide for the Sales Professional’s annual goal setting along with an action plan for attaining those goals.”

4. Complete Idiot’s Guide to Business Plans

Writing about The Complete Idiot’s Guide to Business Plans, Moran told me, “While writing this book, my co-author and I were very careful to include key questions and points that are relevant to any business–even those not seeking external loans or investment. We believe a business plan can be a very important management tool, providing a way to monitor growth, evaluate personnel needs, track sales and marketing results, and generally ‘take the temperature’ of the business.”

Gwen is a writer whom I’ve gotten to know through some professional writers’ organizations.

Have you written your 2011 business plan?

_______________________________________________________________
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.

“What are some good resources to improve my investment writing skills with an emphasis on equity research writing?” This question recently arrived in my email in-box.

Here are my suggestions:

• If you’re in New York City, the New York Society of Security Analysts has a course or two for you.
• Wherever you live, check with the local society of the CFA Institute. If they don’t offer a good class, ask them if they’d consider adding one. In Boston, at least, the local society listens to member requests.
• Read The Research Puzzle’s “Communicating ideas” post in his “Letter to a young analyst” series.
• Take a good business writing class. If there are no business writing classes, take any kind of writing class led by a good teacher. Strong writing skills work across disciplines.
• Write. Write a lot. Ask an equity analyst or portfolio manager to critique your work. The more you write, the better you’ll become, especially if you respond to constructive criticism by a knowledgeable reader.

I offer customized writing workshops for corporate clients in investment and wealth. I’m not a research analyst. However, I’m good at analyzing client writing samples and then using them as the basis for training.

Readers, can you suggest any additional resources?

_______________________________________________________________
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.

Creative rights are complicated, but every writer and marketer needs to understand them. I’m happy that my friend, writer Wendy Cook, is letting me share her blog post on this topic.

The ABCs of Creative Capital Rights

By Wendy J. Cook

First, let me make myself perfectly clear: I’m not a lawyer. Before you act on any of my personal ruminations here, do please consult an attorney. (1)

That said, as a creator of creative capital, I think I can offer some good ideas from the front lines on frequently asked questions about its ownership, such as:

(1) How can I safely “borrow” from other people’s work?

(2) Should I protect my own work?

(3) What if I’ve hired a freelance writer?

Learning the Alphabet

Let’s begin with a brief tour of the creative lingo.

• Creative capital is anything you’ve invented (created), that is of some relatively demonstrable value to you and/or others (capital) — whether it’s written content, artwork, a product offering or a process.
• Copyrights protect your words.
• Moral rights protect your artwork.
• Trademarks protect your corporate identities, including logos, taglines and product names.
• Patents protect your products and processes.(2)

Lawyers the world over are likely cringing at my broad strokes here, akin to using a blow torch to light a candle, but it’s how I think about it all, anyway. Now that we’re in the ballpark, let’s touch on the bases.

Borrowing From Others

No matter how convoluted, laws exist to guide us on what we communally consider fair or foul. So “Do Unto Others” remains a great starting point for drawing on other people’s creative capital. Remember your grade school teacher’s response when asked if you could have a hall pass to escape? “Of course you can,” he or she would smirk. “But may you?”

Same thing with copyrights. Just because you can reproduce an article or a picture does not mean you’re allowed to. Whenever reproducing somebody else’s creative capital (beyond brief, properly cited quotes as described below), it’s your responsibility to proactively seek copyright or moral right permissions from the author or artist — which may justifiably involve paying them for it.

An exception to this rule of thumb is if: (1) you briefly quote and properly cite somebody’s content, and (2) you’re adding substantial value of your own, versus simply repackaging somebody else’s book report. (A while back, I blogged on some of the nuts-and-bolts rules when it comes to proper citing and sourcing. If you missed that blog the first time, you can revisit it now.)

Protecting What’s Yours

In a perfect world, everybody would respect each other’s creative fields, and you’d need never worry about someone unfairly harvesting the fruit of your labors.

Last I checked, it’s not a perfect world. If you’ve got creative capital that you want to protect against theft, here are some ideas.

Copyrights Have You Covered

Copyrights (and I believe moral rights too) are subject to an interesting characteristic. Authors automatically hold copyright to their work … at least until they choose to sell or grant it elsewhere. That’s whether or not you formally register it with the U.S. Copyright Office or display a notice on it, like: “Copyright © 2011, John Doe.”

So why bother with notices or registration? As I understand it, without these, your legal recourse is limited. For example, should someone violate your copyright when notice and/or registration are lacking, you may still be able to achieve a “cease and desist” order to prevent further offense, but you might have trouble collecting on damages done.

Thus, since it’s cheap and easy to do, go ahead and display a copyright notice on most of your work. Formal registration becomes appropriate if we’re talking book-length or for work that you highly value, but it doesn’t seem worth registering every scintillating word you share, unless you’ve got a whole lot of spare time and money you’re looking to get rid of. (If you do, I’ve got some better ideas; call me.)

Trademarks Are a Different Breed

Trademarks have very different rules from copyrights. My understanding is that you must not only formally establish registered trademarks for your logos, taglines and similar corporate identities, but you must also carefully maintain your ownership, lest it be lost through attrition. Protecting your trademarks requires at least these two important steps:

1. Including the “®” symbol in almost all appearances of your trademarked content
2. Regularly monitoring for and aggressively acting on any violations that occur

If you can’t demonstrate that you’ve been diligent on both of these steps, my understanding is that you can lose the ability to protect your trademark — even if you’ve gone through the bother and expense of establishing it to begin with. Ugh.

Bottom line, if it would be a serious blow to your business to lose the rights to your company name and/or particular product names, taglines or similar marks, it may be worth establishing and maintaining trademarks to protect them.

Freelance Writers and Designers

What if you’re working with a service provider to assist you with your corporate communications? As you might expect, the legal transfer of rights can be handled — or mishandled — in all sorts of ways. There are surely enough variations to provide an army of intellectual property lawyers with job security well into the next century. Since there is no universal standard that I’m aware of, whenever you work with creative alliances, it behooves you to ask how they personally handle it and to ensure that their processes work for you.

Personally, I’m fond of the KISS strategy. My practical goal is to transfer the copyrights and moral rights for client-specific projects to the client … once I get paid for doing the work. Brilliant, huh? I contracted a lawyer to help me form a legal agreement that describes this simple goal in copious legal language. Just as good fences make good neighbors, I believe that good formal agreements make for good working relationships. So far, I’m pleased to report my beliefs on that count have held true.

Even though this is one of my longer blog postings, clearly there’s plenty of remaining learning opportunities on the subject of protecting your creative capital and respecting that of others. So I’ll part with a couple of resources I’ve found handy in my own schooling:

• The Law (in Plain English) for Writers, by Leonard Duboff and Bert Krages II. A good book on copyrights and similar issues, from actual lawyers.
• The U.S. Patent and Trademark Office TESS database. A free resource to check on whether a trademark already is owned. But note, TESS is just a rough guide, not replacing formal trademark searches when warranted.

Wendy J. Cook Communications offers writing, editing and presentation services expressly for the fee-only, passive/DFA, Registered Investment Advisor community. By focusing on this niche, Wendy helps these firms effectively communicate with their clients, prospects, media and the general public in print, social media/Web and e-newsletter forums.

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(1) Lawyers who specialize in these sorts of things are often referred to as intellectual property (IP) attorneys.

_______________________________________________________________
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.