The budget has come and gone leaving superannuation concessions untouched for most Australians and the Coalition has been quick to promise no nasty changes should they win power in the upcoming September election.
Even more importantly, the ASX has finally achieved parity with its pre-GFC value, and the official interest rate has dropped to 1959 levels, making cash a less lucrative investment for risk averse investors. But all this good news does not necessarily mean the good times are back for Australian Fund Managers and Financial Advisers – unless they work at it.
One reason for this is that low interest rates (and thus mortgage costs) have ensured that growth investment focus is now firmly fixed on property with the market and prices booming. And with negative gearing tax concessions still firmly in place, some share investors who sat tight and waited to recoup their capital could now decide to move that capital into the property market, since they might perceive it to be lower in risk and more likely to deliver a positive return than shares.
Another is that investors tend to have long memories of the bad times and short memories of the basic rules of investment and the inherent long term benefits of linking directly to the economy through the share market and managed funds and staying connected to it over the long term.
And then there is also a huge conceptual problem in that potential investors believe that the economy is in dire straits, in spite of the fact that the underlying economic indicators are steady. (Heck, even John Howard went on record on Budget Day to say that the economy was in good shape, with low unemployment and a low debt to GDP ratio).
In my opinion, the only way to overcome these problems is to re-educate those investors who have lost faith and to educate the new investors who are constantly entering the market through compulsory super in order to show them that this as an opportunity instead of a grudge purchase.
I have been writing investment product brochures, newsletter articles and investment updates for over 30 years and I am always surprised at how cyclical the communication process is. I haven’t just written about Time in the Market vs. Market Timing, or Portfolio Re-balancing, or Property vs Shares once, but many times. These basic investment concepts keep on coming up every few years because there are new investors entering the market, or because many older investors do not keep this information top of mind and knee jerk every time there is bad news.
This marketing cycle does not mean, however, that fund managers and advisers can simply recycle old articles, email updates and newsletters. To be effective these investor communications also have to be timely and relevant to shifting perceptions, RBA announcements, government policy changes , the world economic climate and many other factors that influence investor confidence.
So the first question I would ask Financial Advisers is this: does your company have a formal, written investor communication strategy? Have you thought about your target market (or markets) and what you can offer them that sets you apart? Do you have a contact plan that ensures you touch your client base regularly to reassure them that they are in good hands? Do you have a response plan that will enable you to reach them quickly and effectively should an unexpected opportunity or problem arise?
As you can see by comparing the websites of major Fund Managers, each one has its own competitive stance, brand values and customer retention strategy. They are not just emailing or posting out a newsletter once a month out of habit. Their investor communications are part of a systematic customer contact strategy designed to build the client relationship and react rapidly to policy changes or other economic news that may produce new threats and opportunities.
You also have to take care to get the tone of voice right. I am, for example, a great fan of Dr Shane Oliver of AMP. His market updates are not only well written and informative, but at the same time they also take great care to be both balanced and reassuring to AMP unit and policy holders. (I do think, however, that his authority is diminished when he is shown live on video tape – which tends to make him look and sound ordinary, and that is a tonal problem).
In terms of client communication, it is also vitally important not to confuse your audience with investment jargon or economic theory that goes over their heads. Plain English, amplified by simple tables and diagrams, should be the order of the day.
And finally, you have to communicate facts, or reasonable conclusions drawn from these facts, not mere opinions. As a Financial Adviser, every world you publish will potentially be scrutinised by the ICCC. This is why it is important to have references for every statement you rely on in a piece of writing – a reference to a source or authority, whether that source is the RBA or a newspaper article. (You don’t have to publish the footnotes, but you do need to have them handy if you are challenged.
The best time to start working on a new and effective communication strategy is right now, not only because the election and a potential change of government will probably have very little effect on the basic regulatory environment for investment after September, but also because the property market could take a big bite out of the ASX if investors impulsively jump ship for dry land. The message is educate them – or risk losing them.