Wednesday, July 21st, 2010
preparing for trial

The buyers and sellers of institutional investment management services often go through elaborate rituals as part of a selection process:  RFPs (request for proposals), consultant evaluations, and rounds of dog-and-pony shows at which portfolio managers, marketers, and client servicers vie with their competitors to win the right to manage a pool of assets.  From beginning to end, it can take quite some time and the outcome can depend on the smallest of things anywhere along the way.

I hadn’t thought of it as being somewhat like a court trial, until I had the opportunity yesterday to hear a lawyer discuss a high-profile lawsuit and the related proceedings.  There are many differences too, since you are dealing with points of law and defined procedures in one situation and mere convention in the other, but the final judgment in either case may turn on a few critical factors.

One is due diligence.  Before arriving at court, the parties do intensive investigations, and the tiniest of details can matter in the end.  There’s no substitute for this hard (and often tedious) work.  Similarly, for the buyer of investment services, the more digging that you do the better understanding of an investment management firm you have.  On the other side of the table, the representatives of that firm, who simply want to win the business, don’t have the same kind of burden, but thorough preparation can allow them to sidestep many pitfalls, including the offhand remarks in a presentation that can ruin the chances of getting hired.

Lawyers need a theory of the case, and the ability to “sell” that at trial by constructing a narrative that fills in the necessary information and anticipates the sequencing of it that will have the greatest effect.  Asset managers looking to win business have to do the same, and must deliver a story that fits their organization, the market, and the goals of the prospect.  It’s a tough combination, and tougher yet because it’s not just a one-time event like a trial.  You can’t tell one story to one prospect and a completely different one to the next.

The tendency is to fudge and tweak and nudge it.  Selling the same story in different ways is one thing, but selling a different story altogether is another matter, as is bending the truth to win the business.  “Putting the best face on things” can too easily become a pattern of unethical behavior.  It’s possible to win business that way, just as it’s possible to win a trial that way, but you’ll be found out sooner or later.

And if you are not a practiced liar, your body language might give you away and make your defeat a foregone conclusion.  Yesterday, a tape of a deposition was played, one given by a well-known and well-respected individual.  If all you saw was that tape, you could have predicted the outcome of the trial.  He could not tell his story in a believable way.

After the exposition of a case (be it for a judge or jury or investment committee), you need to make an effective close.  The lawyer making the presentation yesterday repeated the core of his summation to the jury, and I was struck by how it touched on the facts of the case but was crafted to go beyond that, to capture the emotions of those listening.  It was very effective, a reminder that a close is a chance to solidify your message by taking it to another level.  Being able to do so is an invaluable skill.

It helps to have something to believe in, so that the emotions are real.  In this case, the character and believability of his client sustained the lawyer through adversity and in turn made him more credible in front of the jury.  Similarly, if you respect your coworkers and believe in your organization, being convincing is second nature when making an investment presentation.  Faking it is not.

One of the mystifying aspects of the case was that the losing party clung to the misguided belief that they would prevail at every step of the way, and got so locked into their perspective that they couldn’t see how out of touch they were.  That’s no different than the trap a bullheaded investor falls into or the one that snares an investment committee that goes into a selection process locked onto a preferred choice and can’t see that there are better alternatives, despite all of the evidence presented to them.

Waiting for the jury is always hard, and the verdict may not be what you think it should be.  There’s no substitute for a compelling case, but meticulous preparation and effective presentation often win in the end, be it in the courtroom or the meeting rooms where millions and billions are awarded for investment in the markets.