Why Your Next Investment Writer Will Be a Machine

The next time you need an investment writer, don’t bother calling HR. That was BEFORE. Before a firm in Chicago made software to report out baseball game stats. Before artificial intelligence began writing stories. Before AI went from sports to finance. Before algorithms jumped from high-frequency trading to monthly reports.

Generating stories at the click of a bottom based on deep data sets–that’s NOW–and Chicago-based Narrative Science has been a pioneer and the most visible face of this fin tech gadgetry since 2010. ‘Gadgetry’ might be the wrong term, since this development promises to upend asset managers’ reporting processes and force a rethink of the investment writing function, along with the need to hire an actual human being for an investment writer role.

 An umbrella for reporting season

With this new tool, Narrative Science CEO Stuart Frankel says producing something like an investment strategy [pooled fund or SMA] report “goes from the job of a small army of people over weeks to just a few seconds.” As anyone familiar with the month-end and quarter-end rush periods knows, this represents a dramatic improvement over the status quo.  The firm says that their asset manager clients have been able to ‘reduce the number of days spent producing portfolio commentaries by 50% to 75%’ delivering reports that are marketing-approved and compliance compliant.

If it all sounds to good to be true, that’s not the word I would use. In my opinion, it’s something else entirely: eery. I actually got chills watching the 3-minute video below on how Narrative Science’s Quill is being used to expand Credit Suisse’s investment research coverage. The algorithms identify trends and report in plain (analyst) language what’s going on with a given company (eBay in this case).


(For website owners, you can enjoy Quill Engage –their Google Analytics app for site analytics– for free.)

 The new wave

Turning data and analytics into stories clearly has momentum. In March 2014 the Financial Times reported that Fidelity was testing technologies offered by Narrative Science and Kensho, among others. Narrative Science counts American Century Investments and Nuveen Investments along with T. Rowe Price, Credit Suisse, and USAA among its clients. The firm’s portfolio commentary tool for equity strategies had 15 clients by November 2014. A fixed income version was recently made available. (Personally, I’m curious how the package handles non-benchmarked strategies in either asset class).

 Welcome, our new robotic overlords

Kensho’s software, Warren, may be more ambitious in that it allows investment firms to test ideas by unleashing what CEO Daniel Nadler calls ‘a quant army.’ With these technologies, it would seem to follow that the need for flesh-and-blood investment analysts, writers and editors would be reduced significantly. That’s a bit premature. Adoption will take time. Piecing together the headline story on a stock from a bunch of data is impressive, but it doesn’t provide a buy/sell/hold value judgment. It will clearly reduce the need for manual low value-added tasks such as number crunching and descriptive writing considerably. It appears that Narrative Science has for several years been combating the perception that their technology will enable firms to kick workers to the curb. In 2013 Frankel said “It’s less about replacing people, and more about leveraging those folks that are already there.” To be fair, I know some veteran writers and analysts who are overworked and looking for more challenging, creative tasks. Perhaps these new tools will help them make that shift.

Tomorrow, the world

No doubt the AI technology will improve as time goes on, and there are several areas for development. For one, I have yet to see any information about multi-asset or alternative strategy capabilities, though that’s probably just a matter of time. Second, while English is hands down the lingua franca of finance, asset managers highly active in Europe and Asia would have a hard time refusing a reporting tool that delivers material in multiple languages with speed and precision. Once the technology overcomes these hurdles, you can expect to see it implemented everywhere. The question will then become whether these tools become victims of their own success. For reporting, it’s easy to imagine the entire industry racing to reduce cost pressures and improve competitivity. But when it comes to testing investment ideas, it’s hard to believe that firms will be willing to use the same testing environment as their competitors and run the risk of all using the same playbook.

Infographics Infiltrate Asset Management

As content marketing sweeps the asset management sector and the inescapable social/digital wave finally takes hold, some investment firms have taken the plunge and begun to produce infographics: web- and social media-friendly nuggets of visual splendor that convey complex information in accessible or unusual ways.

Here’s asset management firms along with a few consultants and industry groups that are using infographics. Jump in and add any others you can find. Voting-enabled, so choose your favorites.

Why Asset Managers ‘Do’ Thought Leadership

Few asset managers lack the ambition to be recognized as a thought leader. Many publish white papers and studies on a regular basis.  Some unequivocally stamp sections of their websites with the ‘thought leadership’ label just to dispel any remaining ambiguity of purpose. What is less clear, however, is WHY they do it. It’s useful to look at the purpose thought leadership serves.

I had the good fortune of speaking with the head of an investment team who addressed the question in a recent client meeting. (All names have been withheld to protect the innocent). The actual question was “so why do you do thought leadership activities?” I find the answer incredibly instructive.

There are many reasons for asset managers to conduct thought leadership, namely:

Thought leadership helps provide structure and promotes rigorous thinking.

In the context of ever-evolving markets, investment and research teams tackle interesting and important questions every day. Rendering that output in an accessible, external form forces you to construct a compelling narrative that leads the audience from the introduction all the way to the conclusion. It sounds simple. Logical missteps or unanswered questions are not permitted. The benefit here largely goes to the team undertaking the activity, in that it raises the quality of analysis and communication.

Thought leadership fosters innovation and product development.

If you have a new client request or regulatory change, you have an impetus for identifying a solution. The path you take to tease out the right approach and the client’s decision (e.g. change strategy, shift assets, adopt a new framework), along with the final outcome–the client’s success–form the crux of a case study. Investors (whether they admit it or not) often exhibit a herd mentality. This is not a criticism. There are several reasons investors should care a great deal about what others are doing–not least because whole groups of investors share similar concerns. For asset managers, sharing that knowledge and client ‘win’ with the outside world makes good business sense, because it can bring the ‘lessons learned’ to a broader audience for whom it can be quite relevant.

Thought leadership allows managers to differentiate and deliver more than ‘just’ financial performance.

Lots of players on (often) clearly demarcated fields mean it’s rather difficult to stand apart from the herd among, for example, first quartile US large cap strategies. Investment management is tricky, in that while delivering strong performance trumps all else, there’s still the ‘else.’ Investors value clear, timely and insightful communication. Anything you can deliver that lights up their ‘priorities radar’ — be it a market or regulatory outlook, new portfolio construction techniques, or investment committee best practices — can strengthen the manager-investor relationship.

Thought leadership creates awareness.

Clients of professional services firms often prove willing to lend their attention to insights,  new solutions or trends–especially when it’s about ‘them’ and their area of activity. Thought leadership content with real substance stands out from what Jack Bogle dismisses as ‘financial pornography.’ All other things being equal, a thought leadership piece will garner substantially more client engagement than a product launch press release. Journalists give greater consideration to the former. It’s not hard to understand why. Thought leadership materials create an opportunity to engage with journalists in a more meaningful way–the clear advantage being that discussions with journalists translate into press coverage, boosting brand awareness and credibility, as any PR manager will tell you.

What’s more, for asset managers that have adopted ‘cause marketing’ either bolted-on (more common) or as a founding principle (think Generation IM)–a broad category that could span activist hedge funds, green investing boutiques, long-only managers with a focus on corporate governance, or more ‘plain vanilla’ shops with a specific corporate social responsibility focus (i.e. workplace diversity, a low-carbon future, etc.)–raising awareness on a particular topic counts itself as a win.

A win for all

While this list of reasons why asset managers do thought leadership may not be comprehensive, it certainly puts forward a number of valid purposes that can serve to inform an asset managers’ thought leadership activities. Coupled with the ways that thought leadership can add value for investors, it provides key elements for making thought leadership a mutually-beneficial proposition for asset managers and investors alike.

What’s your view? Are there other reasons for asset managers to conduct thought leadership programs, in your opinion?  Do you think that thought leadership is worth the effort, and that it ‘pays off’ for all parties involved?

How Content Marketing Is Sweeping Asset Management

More and more asset managers are riding the content marketing wave. What began in so-called Anglo-Saxon markets like the US, UK and Australia has quickly swept Europe and Asia. Firms are looking to create new content teams or reposition existing ones in order to refine the focus and to boost both the quality and volume of content. In this post, I explore the key drivers underlying this trend, along with opportunities and risks for asset managers. Finally, I offer a set of guidelines to help asset managers raise their content game and successfully navigate the oncoming deluge of less-than-stellar content.

Wait. Content what?

Content marketing relies primarily on storytelling and publishing to reach prospective clients. Messages are transmitted via a range of channels that include online articles, how-to guides, videos, documents (case studies, white papers, brochures, magazines) and more. Most content marketing evangelists advocate giving it away for free. It differs from other types of marketing that focus more on promotional and price-based offers.

Content marketing’s global domination

To some observers, there’s nothing revolutionary about content marketing–especially since the key tactics and formats have been around for decades. Yet, the term ‘content marketing’ itself appeared only in the late 1990s, and has really gained traction among marketing professionals over the past few years, with the founding of organizations such as the Content Marketing Institute. Worldwide, over 90% of marketers recently surveyed say they currently use content marketing.

content marketing table global

Asset managers board the content train

In this context, it’s no surprise that asset management firms have come to embrace content marketing. In some cases, this entails boosting headcount by adding investment writers or marcomms coordinators, often dedicated to a specific client segment. In continental Europe, some asset managers have created new content marketing teams and labelled them as such. Others have drawn from already-established product marketing, investment writing, PR, design, video & web teams. While the evidence is, in part, anecdotal and relies on discussions with industry marketing and HR professionals–I have no doubt that these moves signal a real move towards more thoughtful content marketing buoyed by additional resources and greater support from top management.

Why this makes sense

In a way, content marketing in the financial services sector is nothing new. In a guest post for Digiday, Barry Lowenthal details Why Finance and Content Marketing Go Great Together. To reiterate a number of my favorite key points:

  • “Financial-services clients [companies] have long been in the content game, investing tens of millions of dollars in research that they distribute to their clients.” Investment banks and sell-side research teams especially have perfected this activity.

  • ”They already have a publishing machine in-house.” Yes, nearly every firm can publish. But some firms have yet to uncover the true potential of a well-tuned machine.

  • ”They’re usually not selling anything online, so their KPIs lean toward engagement, which is the sweet spot for content marketing.” While some firms lament their inability to sell online directly to consumer (due to lack of infrastructure or regulatory hurdles, for example), it reinforces the role of the sales force and two-way interaction with clients.

  • They ”intuitively grasp the importance of being thought of as thought leaders.”  Go here for more on how asset managers’ thought leadership can create value for investors.

To these points I would add that content marketing suits financial services particularly well because education is key. Market developments, regulatory changes and product innovation–which are constantly in a state of flux–can all impact clients’ financial outcomes.

Several additional factors are making themselves felt in the asset management space:

  • Social media is becoming a must-have, at least for retail/advisor segments & recruitment purposes. This very public form of two-way communication and the opportunity for content to ‘go viral’ mean that managers have to focus more on delivering messages that meet the audience’s needs. Evidence from PwC confirms that firms that do this well have the greatest success.

  • Heightened competition, fee pressures, the growing popularity of passive strategies, and the decline of sales commissions (distribution fees) make it essential for managers to communicate more on the relevance and the added value of their product and service offer.

Proceed with caution

Without a doubt, asset managers’ embrace of content marketing merits praise–this is a positive development that will help revitalize firms’ attention to clients’ interests. Bumps and challenges may present themselves during the transition.  An amazing slideshare presentation from Velocity Partners warns of the unseemly underside of content marketing’s ascent, namely, lots of:

According to Velocity, key potential obstacles to include:

1. Coping with a marketing skills gap: finding “people who ‘get’ content, understand context and can actually produce things that audiences want to consume.”

2. Generating friction through mediocre content. Audiences will raise their defenses and become less trusting.

The warning: poor content brands risk being washed away amidst the effluence, while strong content brands stand to gain ground.

So, what’s an asset manager to do?

The marketing skills gap can be combated by informed hiring and training decisions. Consistently delivering high quality content and building a strong content brand is less straightforward. Here are a few tips:

1. Go a step beyond know your client (KYC) to know your audience (KYA). Find out what they know, where they get their information, how they make decisions. Document this and share it within your organization so that everyone is ‘on the same page.’

2. Identify and address clients’ most important issues–these are your benchmark. How you relate to them largely determines your relevance.

3. Raise the bar for the quality of your communications. Set a written content strategy and editorial policy.

4. Pay attention to the messages, articles and videos that capture your attention. Re-use the most effective storytelling techniques you find there for your own content.

5. Plan ahead, execute to near perfection, measure and analyze the results. Make adjustments, rinse and repeat to follow the path to continuous improvement.

6. Be patient–the road to success–earning your audience’s trust–takes time.

By following these guidelines, asset managers can build strong content brands. As Velocity points out, a strong content brand creates a virtuous cycle: strong content brands tell great stories that attract new talent (that tell great stories).

What’s your view? Do you have other examples of how content marketing is sweeping asset management? Additional tips on how to create great content?

How Asset Managers’ Thought Leadership Creates Value for Investors

Not everyone is convinced that an asset managers’ thought leadership content in its various guises–email, video, slides, events and long-form articles–can add value for its audience of investors.

According to critics, thought leadership amounts to a mundane, me-too effort that succeeds only in killing trees and filling pixels in a way that provides sales teams something to shove in front of prospects and clients–just like the competition does. While these naysayers may often be justified in their cynicism, especially regarding mediocre content, it’s not always the case: successful thought leadership can create value for investors.

Thought leadership, simply defined, is a company’s effort to communicate innovative and compelling analysis/information that proves useful to the audience, thus driving the business relationship forward. It’s necessarily differentiated from that of other firms, because it’s meant to support that particular company’s relationship with the intended audience (often a specific type of investor). The firm expends time and resources, and expects a return on the investment in the form of higher profits in the future. It’s a fine proposition for the manager, but what can it offer investors?

An asset manager’s thought leadership can deliver three kinds of value to investors:

  1. Technical value
  2. Personal value
  3. Social value

Knowledge, or technical value.

Financial markets evolve constantly, with new types of investment strategies and even asset classes emerging from the sheer force of innovation. Investing today is not the same game it was 50 years ago, wen investing in timber meant that you had a pile of wood, and quantitative computer models that generate buy/sell lists or machines that trade at fractions of a second were not readily available (to say the least).

Thought leadership provides investors with information about new strategies or product offerings, along with explanation of how they work and how to put those products to use within a broader investment plan. To be effective, it must be clear, well-structured, and explicitly tie the key messages to the investor’s objectives. Successful thought leadership in financial services hinges on investors’ needs and paints a full picture of both the risks and potential rewards linked to a given trend, strategy, or asset class.

Successful thought leadership in financial services hinges on investors’ needs and paints a full picture of both the risks and potential rewards linked to a given trend, strategy, or asset class.

Reassurance/confidence, or personal value.

It would be as mistake to categorize investors as simply rational. While sophisticated investors tend to be quite rational, comfortable with models and financial calculations, there is an emotional element to even the most rational psyches. Providing a case for investment or current macro economic analysis that supports their way of thinking can reassure them in feeling that they have made the right decision (to invest or not, choice of product, timing). The audience can use this confidence to persuade other people (especially other members of the decision-making unit such as investment committees) to accept their view.

Acknowledgement/notoriety, or social value.

Thought leadership can, and often should, engage the audience in the discussion. A case study, for example, where a firm goes out and interviews clients could be distributed as part of a thought leadership effort. The interviewee, giving answers if not also ideas, receives recognition of his/her peers. It also provides recognition that the company 1) really listens to its clients and 2) has experience addressing the needs of that type of investor.

Taking a look at these three kinds of value (technical, personal and social), the impact of thought leadership will vary depending on the particular audience member and the effort the firm makes to leverage the value created. In most cases whether a household or large institution, the investor is not a single person, and the decision-making process involves multiple individuals in multiple roles, such as those acting as a gatekeeper, providing advice, approving the final decision, etc. Whether it’s a member of an investment committee, an adviser, or even a spouse, the individual can make use of technical, personal, or social value—or a combination thereof—in the way they see fit.

Whether it’s a member of an investment committee, an adviser, or even a spouse, the individual can make use of technical, personal, or social value—or a combination thereof—in the way they see fit.

A company well-equipped to aid them in realizing this value will engage the audience by delivering pertinent content as part of a broader consultative selling process in order to grow the relationship. In financial terms, the consultative selling process backed by successful thought leadership can, but does not always, translate value into better financial performance (risk-adjusted return, better diversification, avoidance of loss) for the investor.

So, what do you think? Do you know of any other ways that asset managers’ thought leadership can create value for investors?