The last posting concerned the conversations within an investment organization that form the basis of its decision making process.  Looking outward, for those who need to talk with clients and prospective clients about that process (and the results of it), there are tremendous opportunities and risks.  And many in the investment business would rather avoid those interactions if they could.  It’s just not their favorite part of the job and, partly because of that, they tend not to be very good at it.

Today’s title came from a phone conversation that I had with someone a few months ago that concerned the process of communicating about an investment firm and what it does.  I said that I’d had some success at new business pitches and review meetings simply because I was “marginally less oblivious than most portfolio managers.”  Good relative performance, if you will.

I have used the phrase since and those hearing it usually smile knowingly.  Jamie Ziegler, the founder of AUM Partners, did so when I related the story to her at the CFA annual conference after her session on “Best Practices in Client Communications.”  Her message was that “emotional intelligence is the foundation of superior client communications skills.”  Unfortunately, that’s not the strong suit of most investment professionals, yet they are often thrown into situations where they are expected to communicate well.

Leading up to Ziegler’s presentation, I had been in three conversations with people at the conference about the nature of investment organizations and how they tended to fall into two camps — those that came across as curious and those that appeared to be primarily defensive in character.  So it was an interesting coincidence when Ziegler used those two words to describe those individuals who are effective communicators and those who are not.  Openness and honesty engender trust.  That’s the first lesson to learn.

Ziegler covered plenty of tips for improving communications (truly listening is a hard one for most of us), but firms need to also make assessments about who can be successful at carrying a heavy burden of communication and who can’t.  Too often, investment professionals are put in situations and given messages to deliver that are bound to lead to failure.  Sometimes you have to reinvent the communications construct to succeed.

Just as the methods of communication may need to be adjusted, so must the content itself.  Several speakers talked about how clients and prospects now expect different information.  Mellody Hobson of Ariel Investment said that “there’s no question the relationships with clients have changed.”  They are now more risk averse, honing in on this statistic and that, and asking for “a detailed discussion of your risk management.”  New items are expected to be found in pitch books and review books — and different topics need to be addressed in the meetings where they are presented.

The author Sebastian Mallaby said that the “conversations between hedge funds and their clients aren’t what they should be,” that there isn’t enough transparency and that the “right” things often aren’t discussed.  Ashvin Chhabra of the Institute for Advanced Study talked about the need to frame investment decisions with individuals in completely different ways, including recognizing that “you can’t asset allocate your way to another part of the wealth distribution.”

The “what” of the conversation is changing, in no small part because of the amazing market events of this millennium.  Unfortunately, communications can become more reactive than they should be, resulting in a backward-looking agenda that leaves important matters unaddressed.  Finding the right balance is critical.

More importantly, across the years issues will come and they will go.  But those that know how to communicate effectively have an advantage.  And often all it takes is to be marginally less oblivious than everyone else.

This is the ninth in a seriesthe research puzzle | This is the series to date. on the CFA annual conference.  Up next is a look at the power of networked conversations.