There are 23,000 firms marketing money management services in the United States, up from 2,300 just 30 years ago. That does not include 3,000 to 4,000 hedge funds. In aggregate, there are well over 25,000 firms actively and aggressively telling their story.

Why do clients select one investment adviser over another? Although institutional clients are often more sensitive to investment performance than wealthy individuals, surveys indicate that both constituencies select a firm based on trust, experience, and overall expertise.

A firm's reputation, its understanding of a client's needs, and its ability to communicate are at the center of a client's decision-making process. A recent study found that among manager qualities, consistent performance was considered to be more important by far then outstanding performance.

During the selection process, prospective clients want to be assured that a money manager:

• Will take the time to understand the client.

• Has worked successfully with similar clients.

• Will stay personally involved rather than delegate the relationship to junior colleagues.

• Will work to ensure that there are no surprises in the relationship.

• Will seek to develop and maintain a personal relationship with the client.

What all of this means is that investment advisers who serve the institutional and high-net-worth market have numerous opportunities to differentiate themselves in a very crowded field.


Every professional manager knows that retaining clients is as difficult as attracting new ones. In a competitive industry - especially in a difficult market environment when clients are prone to question results - accounts become vulnerable. For the purposes of this discussion, however, we exclude good investment performance, which is an assumed deliverable.

Among the reason that clients come to be at risk are:

"You don't call me." The client feels that the only communication with the manager is the account statement. There is no relationship or any sense of partnership between the client and the manager. It often is productive to ask clients how frequently and by what means they would like to communicate - giving the client this option is itself a critical ingredient in the relationship-building process.

One size fits all. The client has the impression that the manager services all clients the same way. Requests for something special or a different approach go unheeded.

We have found that many managers believe that not hearing from the client means that the client is satisfied.

However, we all know that in today's competitive environment, a client who is not talking to you may be talking to your competitor.


It is essential for the manager, in shaping the client's experience, to position investment performance in the proper perspective.

There is the widely accepted industry standard called "the five P's" - philosophy, process, performance, people, and price. Investment firms often focus on performance, setting the client's expectation to view the firm narrowly, without paying attention to what leads to the performance. Rather, the role of investment performance should be to validate all the other P's.

Expectations can best be managed through a client strategy. This strategy should consist of a "business plan" that defines what both the client and the manager need in the relationship, including service levels, contact standards, and a problem resolution process, all linked to the specific requirements of the client.

The underlying theme should be a partnership, with the same definition of success for both parties. This way managers can differentiate themselves by demonstrating that they consider everything the client considers important.

There is far more to the relationship than simply money management. There is also an interpersonal side.


Communicating effectively with clients is frequently difficult for money managers.

Humans can articulate a maximum of 180 words per minute, while the brain is capable of processing up to 600. The resulting gap means that boredom and wandering are built into verbal communications.

Therefore, the message must be strong, compelling, passionate, and enthusiastic to capture someone's attention.

For many investment advisers, this is a challenge. They tend to use techno-speak and to talk about features and numbers. Meanwhile, the client starts to get bored or simply accepts the message at face value rather than looking at it as value added in the relationship.

University research has shown that there are three elements to getting a message across, and each element has a different weight:

• The message by itself constitutes only 7% of effective communication.

• Tonal inflection amounts to 43%.

• The remaining 50% is body language.

What are the implications for how managers communicate with their clients?

• If all you do is write to clients, the chance of effective communication is only 7%.

• If you first talk to clients on the phone and then send them something in writing, you achieve 50%.

• If you visit clients in person, talk through what you are presenting, and then send something in writing, you have a better chance of achieving 100% communication effectiveness. (This, of course, is not realistic for every client. That is why many organizations sort their clients into segments, with perhaps 20% that absolutely require communication in person.)


One buzz word in the investment management industry today is "value proposition." When clients evaluate a money manager, what they are really looking for beyond the basics is an answer to "Why should I do business with you?"

What the client wants to hear is four or five compelling benefits from a relationship. Managers should not merely list key credentials, features, and attributes of their services, but rather state the reasons why other clients have retained them.

Lastly, when it comes to effective communication, the goal is to remove all surprises, or at least to manage them.

From the clients' point of view, most surprises are negative. Nevertheless, clients do not want to read about them, or have to pull them out of you, or have you tell them what they already know.

In short, they want managers to communicate with them like partners, not accounts.

Mr. Lubin is the chief executive officer of FMS Group Inc., a consulting firm in Blue Bell, Pa. that advises financial services firms on sales and marketing strategies.

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