In the wake of the financial crisis there has been a call to re-evaluate risk measurement in financial models to better predict economic downturns. Morningstar’s Director of Quantitative Research, Dr. Paul Kaplan, discusses his current work in developing new risk models in a post-crisis world. The article on FT Adviser can be found here.
My colleague Paul and I were given the enviable task of representing Morningstar at this year’s IFP Conference, held at Celtic Manor Resort in Wales. It has been a wonderful event for networking and the speakers have truly been thought provoking in sticking with this year’s theme, “Driving the profession forward.”
On the first afternoon I attended a session about technology – first looking at wraps, then at various cash flow tools and finally a discussion on how to choose software for your business.
John Porteous from Macquarie highlighted that wraps should be invisible in a business. Hopefully any technology you’re using can be integrated into your process seamlessly but I think the notion of the invisible wrap is a great goal.
The presentation of cash flow modelling tools was very interesting and I was pleased to see so many in the audience who have taken these tools on to add to their service proposition. Identifying a business need then finding the correct technology solution to deliver it.
Some of these tools are more complex than others but a theme that stood out was the need to take the time to properly learn how to use them. Whether you’re doing live modelling with clients or just preparing presentations for meetings, proficiency will make the whole process so much more effective.
Ben Crockford from Anametric Limited then shared some really good ideas about the process to follow when selecting technology solutions for a business.
- Make a shopping list and keep it so your sure the technology meets your needs
- Research the market before contacting suppliers
- Control the demonstrations and be sure you’re not just being shown the shiny stuff – make sure the technology can deliver the things on your list.
- Be thorough in your due diligence – trial, test on your own – but be prepared to compromise. There are no perfect solutions.
- Budget your time and properly plan for implementation
With any addition of technology there is an implementation phase which can be just as important as the actual technology. If the provider of the technology offers help with implementation, take them up on it.
Overall, the session stressed the need for smart technology solutions to scale business processes and deliver higher quality service – themes that have come up in conversations I have had with our clients over the past 6 months.
More IFP Conference in my next post – the golf course is calling!
Need to show how a portfolio would have performed over time? Need to incorporate fund switches, re-balancing schedules and fee structures in the performance analysis? No problem.
The hypothetical illustration tool can be used to build compelling sales presentations or recommendations for clients. Click here to view a short video showing how to build an illustration and produce the report.
I love to learn about digital marketing and I subscribe to goodness knows how many marketing blogs and newsletters. But sometimes the information can be depressing… And then inspiring!
First the Bad Stuff then The Really Good Stuff (F-shaped Reading Patterns)…
I recently visited a new source for me, Nielsen Consulting, who do website usability research. They had research proving that a huge amount of people don’t scroll down web pages. And those that do scroll down web pages or emails are most likely only scanning my carefully crafted prose for the key facts.
I instantly increased my productivity by becoming less of a perfectionist right there and then.
The Really Good Stuff (F-shaped Reading Patterns)
After a wave of disappointment and career reassessment I read a little further and found the good stuff.
People scan communications in an F-shaped pattern!
What does that mean?
1) That means people read more of the first line of your communication than anything else
2) They scan down the left side of the writing for things that catch their eye
3) They read more of the first line of a paragraph than the second line.
This means we need to put our key messages at the top of the page, on the left hand side, and put secondary, tertiary messages etc at the start of new paragraphs.
All fairly obvious stuff when it’s pointed out? But, when I review some of the emails I have sent out over the years I definitely haven’t optimised the communications for this reading pattern.
Here’s an example of a draft email I wrote to tell people about OBSR ratings being added to Morningstar Adviser Workstation. It doesn’t matter about the specific subject just take a look at the position of the key messages, highlighted in yellow.
Not "F-Shaped"
Not optimized for F-shaped reading is it… So I reworked the draft to move the messages around. See the second version.
"F-Shaped" text
Example 2 is above and you can see the key messages have moved in to the prime positions that fit the F-shaped reading pattern. Thank goodness the English language is so flexible. It allowed me to quickly move the messaging around with very little change to the text.
Does it work? That is yet to be determined as, at the time of writing, the message hasn’t gone out yet. But, I believe it will make a difference.
Will it mean 30% more interest? I’m not sure, but what I do know is each time I test and prove that something makes a slight difference our campaigns become more effective. The compound effect isn’t just for interest you know!
This improvement, plus all the rest I have made over the years, means email marketing provides me with a far better return for my time than it did at the start.
Why not optimise your next communication for the F-shaped reading pattern?
Do you have any tips for making emails, or other communications, work harder for you? Please share them with this community in the comments section below. Or email me at jon.standring@morningstar.com.
Regards
Jon
Read more about F-shaped reading patterns and see some stunning eye-tracking images that visually show the patterns at Jakob Nielsen http://www.useit.com/alertbox/reading_pattern.html
Morningstar is proud to share with you BrightTALK’s upcoming series of web seminars discussing ETFs ten years after their launch. The seminars will take place on Tuesday September 14th with on-demand videos available thereafter. If you use ETFs and want to learn more, or if you’re considering using them in portfolios, this will be a great chance to get expert insight and analysis. Click here to visit the ETF Summit homepage or see below for registration and details on each seminar.
Presentations Include:
“How to use ETFs as Building Blocks for a Core Portfolio”
Live: Tuesday 14th September, 2pm BST, or afterwards on-demand
Register here: http://www.brighttalk.com/r/8Rf
**
** Ben Johnson, ETF Strategist at Morningstar will provide a broad overview of both the tactical and strategic potential for ETFs in investors’ portfolios. Ben will examine the advantages and disadvantages of using ETFs as building blocks for a core portfolio, discuss how they can be used to supplement existing core positions, and provide real examples of core portfolios constructed solely of ETFs.
“Panel Session: The Truth about ETF Investor Safeguards”
Live: Tuesday 14th September, 4pm BST, or afterwards on-demand
Register here: http://www.brighttalk.com/r/nRf
At this interactive panel session you will be able to pose your live questions to expert panelists; Chris Sexton, Head of Investments, Saunderson House; Manooj Mistry, Head of db x-trackers UK, Deutsche Bank and Mark Weeks, Chief Executive at ETF Securities. This webcast will be moderated by Bradley Kay, ETF Analyst, Morningstar.
“An Adviser Perspective: Incorporating ETFs in Practice”
Live: Tuesday 14th September, 3pm BST, or afterwards on-demand
Register here: http://www.brighttalk.com/r/sRf
Join Philip Bailey, Head of Investments at Assetsfirst and Provisio Portfolio Solutions. In this webcast you will learn how a seasoned IFA has successfully incorporated ETFs into new business practices and how these can be leveraged to benefit both your business and clients.
“Choice & Diversity: The London Stock Exchange Guide to ETFs”
Live: Tuesday 14th September, 12pm BST, or afterwards on-demand
Register here: http://www.brighttalk.com/r/MRf
Gillian Walmsley, Head of Fixed Income Products, London Stock Exchange will provide a guide for IFAs to utilise ETFs on the LSE. She will highlight the continuing development of these simple and flexible investment tools and identify the key drivers for the market’s continuing growth and expansion. Gillian will also answer your questions on key trends in new product development and discuss what the future holds for this market.
Register for any or all of the webcasts here: http://www.brighttalk.com/r/qRf
If you are able to join live you will be able to submit real-time questions to presenters and take part in presenter-led polls. All the webcasts will be available afterwards to view on-demand, at your convenience.
Last week I was up in Scotland at a conference aimed specifically, but not exclusively, at the investment trust community. Attendees included fund managers, board directors, chairmen of individual trusts, representatives from the Association of Investment Companies (AIC) and key industry figures from the world of investment trust research.
It was a fascinating experience on a number of levels, but what struck me hard was the average age of the attendees. I stress “average” because – as we know – there are always outliers, but I couldn’t get away from the apparent absence of an entire generation of participants from these vehicles.
There was a wealth of information and experience in that room, including some highly influential individuals (current and past). However, their shared bank of knowledge doesn’t seem to be passing down to new participants, as financial advisers have shied away from investment trusts since the split-capital trust scandal of the early 2000s.
Yet everyone with whom I spoke at the conference extolled the virtues of closed-end funds at the cost of open-ended funds. And cost is a key word here – not only do investment trusts tend to be cheaper than OEICs, but their costs are more transparent, too. So an investor can see clearly how the fees are comprised – a transparency that’s left wanting much of the world of OEICs.
Over the coming weeks and months, we’ll be creating a series of articles and presentations to help advisers demystify investment trusts and overcome their long-held fear that stems back from the split-cap debacle. Many investors have lost out on superior returns from investment trusts over the last decade and those who weren’t active in the market at the time are prone to fear of the unknown. We need to change this misconception that investment trusts are “damaged goods” and help the next generation of investors to consider for themselves where investment trusts have merit.
We need to change the attitudes at the board level, too. We want directors to embrace renewed interest from younger investors and we need them to impart their knowledge and help continue their path into history. After all, without the first investment trust in 1868, who knows how the industry would have developed?
This video shows the portfolio analysis tools available within the Adviser Workstation. Get up-to-date valuations, chart performance and compare portfolios with models. Click here to view the video.
Every IFA is short on time so if things can be done to free-up time in your day I bet you might be interested. You can’t cut time from client meetings and you can’t say no to every industry event but what about all the preparation that goes into your service proposition? A good process can make this preparation more efficient and more effective. So how do you implement one?
I’ll go out on a limb and say three quarters of IFAs in the UK could use some help with process. Some firms use a process provided by their network or compliance people. Some firms have put some thought into a process but fall short in implementing it. And some firms just do not follow a process – relying on a collection of tools to provide bespoke service to each and every client.
To implement a good process, or improve an existing one, I’ve found that getting everyone on the same page is a good start. If you have a paraplanner that takes care of much of the preparation, do they know how the information is presented to clients? Do other advisers in your business follow the same process or do they have their own way of doing things? And if someone goes on holiday, does the whole thing come screeching to a halt?
If you have a great process in place, please stop reading and give yourself a pat on the back. If you think you could be more efficient, more consistent or provide a better service, below are some tools within Adviser Workstation that can be used to improve your process or more effectively implement one:
Research
- Create investment lists to give you instant access to all the funds you work with regularly, all the funds in an asset class, all funds that can be used in an ISA, or all top rated funds.
- Build custom searches to automate your research process. Easily see up-to-date results for all funds in a sector, category, region or that match any of your own criteria.
- Create your own views so you can instantly access relevant data and statistics when reviewing your fund panels.
Client Reporting
- Import your client portfolios from your wrap platform(s) for instant access to portfolio analysis tools.
- Setup report templates for different client groups so client reporting is done automatically each month, each quarter, each year or whenever reports are needed.
- Post client reports to the web portal so your clients can view their portfolio analysis securely, online.
Attracting and Signing New Business
- Create hypothetical illustrations showing how a portfolio would have performed over time as well as the effects of fees, rebalancing or taking income as opposed to re-investing dividends.
- Build and maintain your model portfolios on the system for instant analysis anytime.
- Use the investment plan tool to asses a clients risk level, recommend an asset allocation and then recommend a model portfolio to match it.
Monitoring Clients and Securities
- Set alerts on lists of funds or for clients so you are notified when there is a manager change, a rating change or a large price movement, for example.
- Compare the asset allocation of a client’s portfolio with that of a model
- Build and maintain your own benchmarks for accurate portfolio benchmarking
For more helpful tips, feel free to contact me by email – jim dot murphy @ Morningstar dot com
Morningstar.co.uk today announced the results of our first exchange-traded funds survey. We spent six months quizzing professional and individual investors about their attitude towards, understanding of and experience in ETFs, and will be asking the same questions at six-month intervals to build up a picture of how this relatively new asset class is being used and viewed by UK investors over time.
Over 1,000 investors responded to our first survey, 15% of which were professional and 85% individuals, and we were surprised to see few surprises in the results.
Exchange-traded funds are known for their low costs but trading too often can quickly turn this low cost into a high one—something we had feared some investors may have been unsuspectingly tempted into. Instead, it seems that current ETF investors are not using them for fast-trading, risky bets, but instead as longer-term allocations to overweight a specific sector, country, or inflation protection.
Overall, the number of individual investors and advisers across Europe who use ETFs is still extremely low, and of those who remain wary of this asset class our survey revealed more education is in high demand.
Of professional investors who are unsure whether they want to invest in ETFs, 67% cited a lack of information about exchange-traded funds as the primary reason for their caution. Among individual investors, it was an incredible 77%.
Having trawled through the data and analysed the results, Morningstar’s associate director of European ETF research, Bradley Kay, commented that there is a stark split between respondents who are in need of more information about ETFs and those already familiar and the product’s key features. “Even among active investors, we found ETFs are being used in quite a passive way, for example to overweight in a particular asset class and with infrequent trading thereafter.”
We’re certainly encouraged to see that investors are already putting ETFs to sensible use in their portfolios, but— as expected — there’s an ongoing need for further information and education…something Morningstar is only too happy to accommodate!
If you’d like to know more, you can download the synopsis of our first ETF survey results here, and participate in the second ETF survey here.
One of the inspirations for this blog came from the many conversations I have with advisers everyday and the challenges advisers face in operating a profitable business, finding enough time in the day, and staying within regulatory guidelines that seem to always be changing.
We have been able to help many clients overcome these challenges so this blog is a way of sharing those ideas and solutions with others.
One example of this was Peter A. Sudlow, Principal of Sapienter Wealth Management who came to us wanting to streamline his bi-annual review process. It normally took him the better part of a month to gather all the statements, do all the calculations and produce the client reports.
We managed to help Peter import his clients’ past transactions from the platform into the Adviser Workstation. Once imported, he had the full suite of analytical and performance reporting tools at his disposal. Some quick construction of performance report templates in the system and he’s able to produce better quality reports in less than half the time.
His next time bi-annual review period is likely to be even quicker as he works out the best way to implement this new process. So with a little investment in time our client has been able to add significant value for his clients in terms of the quality of reports provided and he has freed up more of his time to spend with those clients or perhaps potential clients.
If you are in need of a more efficient process or a way to justify fees to clients it may take an investment of time to learn something new. Many advisers I speak with just can’t spare the time. But the ones that have found an hour here or an hour there to learn something new or to implement a new process, they have quickly seen the return on their investment.
Over the next 5 weeks I will be sharing more examples like the one above. Hopefully you can benefit from them. Hopefully they spark some of your own ideas. If you have any to share, please do. If you’re looking for help, please let us know!