What is your competitive advantage as an
investment advisor?

Rebecca Fender, CFA

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As investment professionals, we spend a great
deal of time perfecting our analytical skills, keeping up to date with the
latest events in the market. Another role that some of us play is as
communicators, finally explaining to potential clients the advantages of our
advisory services. This field is very competitive, so customers need to know
what makes us different from the thousands of investment consulting firms.


The selection process for an investment
manager often ends in something similar to “a beauty contest,” where
after requesting an investment proposal, only a small group of firms are
invited to attract decision-makers. Some factors are raised (and tailor-made
adaptations are made) for a particular audience, but despite being well
prepared, often the suspicion is that in the end, the committee will just
choose those that perform best over a period. 1 to 3 years.


When we asked our CFA Institute Financial
NewsBrief readers what they emphasize when searching for new clients, only 19
percent of the 484 participants said that performance is what guides them.
Perhaps this is because the uncertainty of the markets means that the promise
of consistently high returns is a sure way to motivate customer turnover.

On the other hand, what generates loyalty to
the ups and downs of the market? The most significant number of responses (35
percent) recognized that their investment philosophy differentiates them. With
this comes his passion for investing and conviction in his investment process.
These are the characteristics that the “big investments” have in
common. My colleague Jason Voss, CFA, often points out that the search for
alpha means by definition that you must do things differently than the
competition. Therefore a good investment philosophy, consistently respected for
many years will stand out.


The second most popular response, at 27
percent, is an experience. Having seen how the markets react and what they
learned on the road is what gives the advantage – this is something that can
not be copied. Wisdom cannot be taught, and while some employers point out that
knowledge of financial history should guide new graduates in the profession, we
all know that reading a book is not a substitute for having lived the


So, do we know what customers are looking for?
That is perhaps the tremendous competitive advantage that any investment
professional can have. CFA Institute, together with Edelman again, conducts a
study based on investor preferences, asking independent and institutional
clients what is important to them. The updated results will be shown in the
coming months. 


CFA Society of Mexico translated this text. In
case of discrepancy with the original version, the English translation should
be considered as the official version.



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