Anticipation of recovery seems to be the talk of the town, or the beaches, this summer. As it applies to the investment management industry, recovery might refer to the economy, the markets, or the industry itself. There are clear signs that we may have seen the worst for all of these. But what next?? The debate rages whether the economic recovery will take the shape of a V, U, L, or double dip into a W. Will the markets continue to march on, or suffer a significant correction? Will business growth and profitability return to levels that existed prior to the downturn, or will managers continue to struggle for some time?
The fact of the matter is that nobody really knows. I find managers cautiously optimistic, hoping to return from vacations to recovery and expanding businesses, but not with a high degree of confidence. How should management respond to this environment? By staying nimble, investing in targeted ways, draining inefficiencies out of their organizations, stepping up communication with their employees and clients, and focusing on execution to drive results. Planning must be dynamic, thoughtful, and flexible. I am very hopeful that recovery is near, but my sense is that volatility will remain high, as it applies to the economy, markets and the industry, and management which stays very close to the marketplace to react to quick changes will prove more successful than their counterparts who don’t.
I’m working with a client who is now constructing a business/marketing plan. As I mentioned in my last white paper, a SWOT analysis is very helpful in this exercise, and it’s proven to be invaluable for my client. This technique analyzes stengths, weaknesses, opportunites, and threats, and it really helps one focus. It can help to quickly identify areas for improvement and where to really concentrate one’s attention. One important point: when planning, don’t get to the end of the process before bringing in team members and subordinates. You will always get valuable input, and investment management employees generally don’t appreciate a plan which is delivered to them for execution without having had any input.
Last month, I posted some thoughts on this subject. Since then, I have continued to get numerous questions on this topic so I decided to expand on my thoughts. Many managers seem to be seeking training for their sales people. When I’m asked about that, I try to get underneath what they are really asking. Often it turns out that they are looking for solutions for a perceived lack of sales results. Training sales people seems logical, but it may not make sense if the problem with sales lies elsewhere. Further, standardized training is just that, standardized. It doesn’t seek to find the underlying problem. There are many possible issues ranging from firm and product positioning through general marketing to various elements of the sales process. When asked to help specifically in sales training, I seek to understand the entire sales process that the firm uses and find the weak points. These weaknesses may include sales presentation skills often addressed in standardized training, but frequently the problems are more complex and require more thoughtful solutions.
It’s a tough time right now for any manager. Although there is far more optimism in the air than there was a few months ago, the investment community is still cautious. Many managers continue to have trouble gaining any business momentum. I have spoken to quite a few emerging managers lately who express frustration. These firms are either recent start-ups or just small managers who by virtue of their size fall into the emerging manager category. A number of these firms are questioning whether they can survive in an environment which seems to place a premium on stability. How will they attract assets if their prospects are afraid to place assets with a firm that may not survive?
If misery loves company, they should know that they have it with the large managers. Many of these firms have fallen out of favor, rightly or wrongly, due to their affiliation with other financial services businesses under scrutiny from the government and the public. Despite their size, they are not necessarily viewed as more stable than the small managers. Small managers, many feel, have the advantage of focus and dedication to their specific investment approach. They are also often employee owned which aligns their interests with their clients’ interests.
So, emerging managers should stay the course if they are passionate about their investment approach and their business. The investment management business tends to require considerable staying power before firms see the rewards of their efforts. But if they deliver strong investment results, dedicate themselves to their clients, practice persistence, and deeply believe in themselves, they are likely to succeed, perhaps dramatically, over time.
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