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With so many economic crosscurrents and geopolitical tensions, do first encounters ask you what you're telling clients when they find out you are a financial advisor? Use an ism and, perhaps, a thesis as answers.
Isms are timeless regardless of market conditions and theses are timely. Both should be pithy sound bites that connect the dots between your financial beliefs and the advice you deliver to clients.
Here's what a conversation might sound like leveraging an ism from Jim Caron, Chief Investment Officer of the Portfolio Solutions Group at MSIM, and a thesis from The BEAT.
Encounter: "You're a financial advisor? I am sure the market has it wrong and inflation is going to be a bigger problem than the market thinks. What are you telling your clients today?"
Advisor: "Noise is often confused with signals." An ism.
Encounter: "OK, so what signals are you focused on right now?"
Advisor: "One signal we are focused on is the labor market. We believe labor markets are cooling, not collapsing". A thesis.
Below, Jim explains what he means by "noise is often confused with signals":
"Investors often try to find signals in financial markets by simplifying complex matters. The result is a narrative that reflects noise instead of signals. Confusing noise with signals can cause investors to measure the wrong data relationships and form a view that leads to suboptimal decisions when managing risk. You can't manage what you can't measure. So, the focus needs to be on measuring signals, not noise, to drive more optimal investment decisions and create a repeatable investment process."
The BEAT is a great resource to mine for topics on which you should have a timely thesis. Below is additional context for the thesis, "labor markets are cooling, not collapsing," from the April issue.
"Perhaps the key element to a "soft-landing" view is that labor markets cool enough to slow wage inflation, which in turn should lower price inflation. But simultaneously labor must remain strong enough to avoid a collapse that would trigger a sharp decline in consumption and GDP, leading to a risk of recession. We are closely monitoring how this ultimately plays out, as it is an essential ingredient for keeping earnings growth rates intact and supporting equity prices. The interplay between wages, unemployment and consumption is a key risk indicator on our radar screen."
Leverage the power of isms and theses to make first encounters count and be ready for follow-up questions.
Bottom Line: Develop your isms and theses, then, identify ways to incorporate them into all dimensions of conversations with existing and prospective clients.
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At the Advisor Institute, our goal is not to shape your opinion or provide investment advice, rather to share this viewpoint as an example of what we believe to be a superb display of thesis articulation.
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