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How do managers demonstrate to institutions and consultants that their investment process is differentiated?
One of the most frequently asked questions by consultants is: “How is your investment process unique?” Unfortunately, it is also a question that frequently gets the worst answer.
Some portfolio managers and sales specialists are not prepared to answer this basic inquiry or,
even worse, have the audacity to declare, “There is no one like us.” There’s no excuse for managers not to have a well-thought-out explanation about what is truly unique about their approach. They should list the most important features that provide them with an advantage over the competition. With the growing number of managers, strategies and products available today, managers must give potential buyers something that will clearly help prospects remember them. The answer to that question is a foundation on which a manager can build a successful institutional marketing effort. Yet, crafting a persuasive response to the differentiation question often remains elusive and difficult to perfect.
One cringes to hear a portfolio manager voice such a cliché as, “We are unique because we are disciplined and have been doing this for more than 20 years.” Another overused reply is: “Since the members of our research team are all specialists, they know their sectors better than anyone else.” Another loser: “We just focus on managing money our way; we don’t pay attention to what other managers are doing.” These broad generalizations dodge the question.
Preparing a response in advance of a meeting is a key to success. One of the most effective methods to extract the building blocks for a convincing answer is for managers to slightly rephrase the question as they prepare themselves mentally for their presentation. A few examples that have worked well are: “What is the anomaly that you are trying to exploit?” or “What is the one component that would most harm your investment process if it went away?” Thinking along these lines can help managers craft a specific response to the question, “What is the one element of your process that you do better than anyone else?” The answer will help managers effectively explain their uniqueness. Also, during a meeting with a prospect or consultant, managers must provide at least two or three specific success stories that have stemmed from their specific investment approach. It is horribly inefficient for the buyer to have to ask for examples. After explaining what is unique and differentiated about their investment approach, managers should then ask the consultant, “Does that answer your question?” That is the best way to gauge the effectiveness of the response.
Don’t give up on perfecting a response on the differentiation question – the answer will arrive, and when it does, managers will improve the effectiveness of their message.
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