How to Communicate With Investors About Underperformance

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Financial services marketers face challenges every day, from writing investor education articles to managing complex rebranding initiatives. There’s one marketing challenge that we all wish would never happen, even though it’s inevitable: communicating with investors about an underperforming investment solution.

So, tip number one: don’t hide from underperformance. Quite the opposite. Get in front of it, be transparent and talk about what matters most to investors. Trust and understanding will go a long way to building a strong, enduring relationship.

Identify investor concerns

Any project that tackles underperformance must start by identifying investor concerns. And when it comes to performance, investors typically have two highly important concerns:

  • Am I overpaying for my investments?
  • Will I achieve my financial goals?

    • Once you know investor concerns, use them to identify your key messages. Fees and the value of advice are hot-button topics in the financial services industry but for the purposes of this article, let’s move forward with the idea of reassuring your investors that they will meet their goals.

    A note on the causes of underperformance

    The reasons why a fixed income solution may underperform are different from those for an equity solution, and within equities, a Canadian solution may underperform for different reasons than a global solution. For example:

  • A bond fund could underperform because of unexpected interest rate moves
  • A Canadian fund may underperform because of its weighting to energy companies
  • A global fund could underperform as a result of its geographic allocation

    • The point here is that no one-size-fits-all strategy exists for communicating about short-term underperformance. To do it right, you need robust product and industry knowledge, and the ability to make complex issues investor friendly.

    Execution

    You’ve identified the primary investor concern: they’re uncertain whether they will achieve their financial goals. Could there be a more valid concern? We don’t think so. So, now it’s time to execute.

    1. Create a special brochure

    By crafting a special print- and web-friendly brochure, you create an opportunity to talk about the benefits of the underperforming solution. For example, you can highlight:

  • The manager’s philosophy and process – this is especially important if your firm has a strong history or if the manager has a truly unique approach
  • The solution’s role in a diversified portfolio – investors may question why a certain solution made it into their portfolio, offering you the opportunity to talk about asset allocation
  • The importance of focusing on long-term goals rather than short-term volatility – remind investors that they are on the right path

    • 2. Build a microsite

    If you want to reinforce the importance of diversification and asset allocation, you can create an interactive microsite that uses the underperforming solution to diversify investor portfolios. Microsites are a great choice since they can have a long life. Why? Because, in this example, the asset allocation story is important at all times.

    For microsite tips, read Why microsites are a big deal .

    3. Produce a whitepaper

    We think that an investor-friendly whitepaper is equally valuable as a brochure in this situation because they naturally have a more sophisticated feel that relies on data. Talking about underperforming investment solutions isn’t about whitewashing poor returns, it’s about explaining the situation effectively and data can help you do this with clear examples.

    For more on whitepapers, read Whitepaper tactics that work and Five best practices for creating better whitepapers .

    4. Write an advertorial

    Support your investors by supporting advisors. We recommend writing a piece specifically for a trade publication that not only references, but also builds, on the whitepaper mentioned above. Advertorials are a great way to reach a broad audience, and you can tie them into other marketing and ad campaigns.

    5. Host a PM roadshow

    Although portfolio manager roadshows might be falling out of favour as a result of their high costs, and while they aren’t our first recommendation, they’re still effective and beneficial if the portfolio manager believes a roadshow could help with retention efforts.

    Since mutual fund underperformance is unavoidable, we think you should turn the challenge into an opportunity for you and your firm. Your honesty and transparency will help you build stronger relationships with investors. And don’t forget to equip advisors with relevant materials first, since they are the ones who communicate directly with clients and field many of the performance questions from them.