Art & Science Archive
The following is adapted from an article written by Liz Hecht of Alpha Partners for Advisor, a journal for members of the Association of Investment Management Sales Executives (AIMSE). The article is reprinted with permission by AIMSE.
| Comment from a consultant: “Performance history is secondary. We look at performance history primarily to confirm that an investment style is applied consistently.” |
Response from a salesperson: “That’s just not realistic. Of course you can go out and talk about why you blew it. The problem is, you just won’t sell anything.” |
Performance is illusory. It comes and goes. The past is often a poor seer of the future. The best-performing pension funds buy investment managers at or near a bottom, the way successful investors buy stocks. Intellectually everyone knows this…but how many plan sponsors use intellect alone to select or terminate investment managers?
At an AIMSE seminar on successful sales presentations, a simple question was raised: “How do I sell when our numbers are lousy?” The response was, “You don’t. Come back when your numbers are decent.”
This, however, is not necessarily the best or only response. If your firm’s performance is subpar for several quarters in succession, leading consultants, marketing experts and salespeople suggest that you:
Position your firm as the contrarian option.
If the asset class your firm represents is out of favor, negative numbers can be presented as a positive. Says one top consultant, “We recently had a manager come in and say, ‘You’ve seen the worst. Join up now.’ At the time, we weren’t doing a search for his type of manager, but if we were, we would have taken a serious look at his portfolio.”
Use the numbers to tell your firm’s story.
When appropriate, weave subpar numbers constructively into the story of your philosophy and process. Under certain circumstances, advises Jeffrey Slocum of Jeffrey Slocum & Associates, “The diamond should be at the bottom of the chart because it indicates consistency of style. There’s no need to be defensive about it.”
Explain the performance problem and identify the solution.
If below-median results cannot be linked to an out-of favor investment style, clearly identify the reasons for poor performance. Then explain what steps have been taken to ensure that the problem won’t recur. But don’t give the impression that your firm constantly restructures its philosophy — position changes as adjustments to a fundamentally sound process.
Stick to your philosophy.
“Maybe the solution is as simple as time,” says a New York-based marketing consultant. “You’re waiting for an investment thesis to pan out. It hasn’t yet, but you retain a strong conviction that it will. Say so — you can only be wrong. And in the eyes of the market, especially consultants who value consistency, being whipsawed is far worse than being wrong.”
Keep explanations of performance direct and simple.
People like short, straightforward explanations. For example: “We made a big bet on the oil sector. Here’s why it made sense at the time. Here’s why it didn’t pan out. But on balance, over time, our ideas have panned out.”
Take poor numbers seriously.
Don’t let your previous strengths prevent you from facing current shortcomings. Be ready to address any concerns about your negative performance thoroughly — even short-term numbers.
Make sure you understand the problem.
An inadequate explanation for underperformance creates a bigger problem than poor numbers. Some firms are known to say to their salesperson, “This is the party line — now go sell.” Don’t accept this. Insist on what the marketplace will demand of you: a good explanation.
Maintain your integrity.
A very successful New York-based salesperson tells this story: “We had poor performance at my current firm and I stayed. I stayed because I was able to tell prospects, with full integrity, that we have a great product, and the right process and people are in place. In my previous job there were internal problems that weren’t being solved. When I knew they couldn’t deliver the goods, I left. In this business, you can only lose your integrity once.”
Sell philosophy, process and people — not numbers.
As part of the sales process, prospects should be primed to expect underperformance from certain managers during certain periods — value managers when value stocks are out of favor, for instance. When your numbers are down, remember this story told by David Eager of Eager Manager Advisory Services: The vice president of finance for a Southwestern plan sponsor conducted a search to replace an underperforming manager. His consultant presented an ideal manager with a great five-year record. Just one problem: the plan sponsor had fired that same manager five years previously for underperformance.
Don’t hide.
Says a West Coast salesperson, “Sometimes you simply can’t sell until the numbers are there. You should be able to, but you can’t. Still, by maintaining relationships with prospects and consultants, you can make it easier to get hired when your performance turns around.”
If all else fails, sell another product.
“Come back when you have decent numbers” unfortunately is warranted in some situations. But don’t ignore other selling opportunities with the same prospects. If you work for a multi-product firm, establish future cross-sell opportunities by focusing on the products with good numbers.