Every money manager or investment adviser ought to have a good “elevator speech” — a quick, succinct summation of what you do and how (in business parlance) you add value. The elevator speech, so named because it should last no longer than the average elevator ride, is far too important not to be carefully crafted and reviewed in light of how it’s working. It even works as an attention-grabbing opening to a longer presentation.
Your elevator speech must also be tailored to the times and the markets. During secular bull markets, the emphasis should be placed first on growth and return; during secular bear markets, the emphasis might shift to risk management, capital preservation, or even to specialized services such as retirement income planning or goal-based financial management.
You wouldn’t think of not letting your general sales and marketing materials go stale, so why wouldn’t you tweak your elevator speech when conditions warrant?
In my experience, the “greatest generation” asked two primary questions about those with whom they were considering doing business:
- Do I like her (or him)?
- Do I trust him (or her)?
As baby boomers become more and more of the target audience for financial services, an additional question is now being asked:
- Does s/he know what /he is doing?
In our current information rich environment, general platitudes about performance and service will increasingly be insufficient for the savvy prospect (and, since the savvy prospect is more likely to have substantial assets to manage, the savvy prospect should be a primary target). The internet being what it is (for good and for ill), it is unreasonable to expect general claims about how good you are to go unchallenged. With markets today being especially difficult and volatile, those challenges are likely to be more pronounced. Making money in this environment is tough; acquiring money to manage is tough too.
As pointed out by The Wall Street Journal yesterday, few money managers outperform over a significant length of time.
Over the past 15 years, only 42% of large-cap stock funds have beaten the S&P 500 (according to Morningstar and not accounting for survivorship bias). Moreover, persistence is a problem too. Just 12% of the large-cap funds that landed in the top 25% during 2001-2006 period also landed in the top 25% over the subsequent five years, according to S&P. And over the five years ended September 30, 2011, only 6% of all U.S. stock funds held onto a top-half ranking for five straight 12-month periods.
That should mean that your elevator speech must be crafted to deal with what the savvy prospect may know about how tough our job is. Because if we’re going to be paid, we need to be prepared to earn our money. That requires that we have a ready explanation for how we are different from the norm — in terms of performance, risk management and service (both the kind that is responsive, communicative and helpful and the kind that helps clients stick to a good plan when animal spirits attack).
Does your elevator speech include such elements? I doubt it. But it should.