Talking at clients? Neither fulfilling nor useful!

Tuesday 14 February 2017

Andrew Ford Eimear Walsh


Left: Andrew Ford CFA, an investment director at Standard Life Investments

Right: Eimear Walsh CFA, a consultant at Mercer

Sceptical clients, one-size-fits-all communications, contributing to the Pensions Regulator’s Trustee Toolkit and volunteering to help charities with investments – these are some of issues that are being examined by our Value of the Investment Profession “Client” working group. Eimear Walsh CFA, a consultant at Mercer, and Andrew Ford CFA, an investment director at Standard Life Investments, are closely involved, having focused their careers on client engagement. Here they talk to David Clarke CFA about what they want to achieve.

Why is the role of clients so central to the Value of the Investment Profession programme?

Eimear: Having the knowledge and the ability to make important investment decisions when the environment is changing so rapidly is a very tough role. It’s very challenging for clients to remain informed and capable of making these investment decisions. We have to realise that when we are in front of a client, they have a day job. They may have four or five meetings with fund managers a year, and when that manager is trying to explain a concept or topic, the client needs the background and the education to challenge what’s being said to them. And the manager needs to appreciate the person talking to them doesn’t have the same level of knowledge as they might have. It’s about knowing your client and knowing who you are speaking to.

Andrew: Our central aim is to enable clients and members of the profession to work together in a more effective manner. There is a tendency in the investment profession to give clients what we think they need – in whatever format it may be,  say factsheets or update calls – we tend to focus on what we think is relevant. What at times can be a one-size-fits-all approach can be improved upon by taking a more tailored approach in information provision. Due to the diversity of the client base the same product might be used in different ways by different groups. We need to be able to articulate performance and the drivers of it in ways that are suitable for what can be very different groups of clients.

So the interaction is sometimes too much about fund managers talking at clients?

Eimear: Yes, I would agree. And I think clients have become quite sceptical of investment professionals whom they see as always trying to sell them something. They have these investment managers and investment advisers and the more proactive ones are mistakenly seen as trying to sell their services. Some of the time the client doesn’t realise what you’re saying is what we think is the best way for them to proceed. This goes back to the ethical perspective of the CFA – you would never recommend anything that isn’t in the best interest of your client.

Andrew: I agree that a short-term focus on selling is definitely harmful to building strong, long-term client relationships. I think the investment industry has a longer-term focus than some other areas of finance, which was an attraction for me, but there is probably room for improvement. It’s about fostering dialogue, making sure that we aren’t just talking at clients but also listening carefully and making sure that any recommendations are very much in our clients’ long-term interests.

So what is the focus of your work on the committee?

Eimear: We’ve had a very good conversation about who is this client that we’re focusing on – is it the end DC investor, is it the DC trustee or indeed the DB trustee? We realised that the most value that we could add was with the intermediary, with trustees. Some people in our group were quite surprised to hear that the knowledge and understanding of trustees wouldn’t be as vast as you would expect for someone making these large important decisions. As a group, we thought this is where we have the largest problem. We think education for trustees, given that they oversee about £2 trillion of pension assets in the UK, would bring considerable benefits.

Andrew: Another area that we are looking at is charities where we see a potential parallel with the pro-bono work that lawyers do for good causes. We are looking at setting up an educational framework and register for CFA charterholders who might want to serve on charity committees. This could include structured learning along the lines of the Pension Trustee Toolkit and the development of an approved register of charterholders that charities could approach. We are discussing this with the Charity Commission and exploring possibilities such as a mentoring program, which would enable more experienced charity trustees to assist newer volunteers. This could be a great way for CFA charterholders to use their expertise in a highly productive way, increase engagement with clients and improve the reputation of the profession.

In terms of educating trustees where would you start?

Andrew: There is a lot of material out there already, such as the Trustee Toolkit, though much of that content is operationally focused so we are looking at whether we can work with the Pensions Regulator to expand the investment-focused content. Incorporating areas such as behavioural finance, which could help clients identify and manage their own behavioural responses and so avoid making decisions that may damage long-term performance could be useful. ESG (environmental, social and governance) is another area that we are looking at.

Eimear: Behavioural science is very important. As advisers we know it’s something that everyone is subject to but, unless it’s brought your attention, it’s not something that’s on your radar. This is an area that we would like to expand to ensure clients are aware of the biases they have.

So what is the ideal end result of your work?

Andrew: We have to be realistic about what we can achieve in the six months we have, but we are trying to come up with meaningful initiatives that will genuinely improve the industry’s interaction with clients. It would be great if we could move closer to universal information provision that minimises the scope for misunderstanding and just generally makes our clients’ lives easier.

Eimear: I would like clients to be more engaged, challenging the investment professional, and entering into a two-way conversation. My best work is done with clients where I have an interesting engagement. I don’t know anyone who likes walking into a room and talking at people for an hour. Much better to have a good challenging discussion and in the end that will improve the service the clients get.