Today, many investors tend to rank transparency equally with trust when considering an adviser or investment deal. That’s why it’s important for financial firms to deploy solutions that will drive deeper levels of transparency throughout their entire organization as well as how they present and communicate investment deals—especially if they want to keep their current clients loyal while bringing new ones onboard.
In fact, some experts feel that investor concerns are quite legitimate given the turbulent climates they’ve had to endure. Consider the fact that the financial crisis of 2008 is still fresh in the minds of many, and that heightened media scrutiny against the financial industry now has investors more skittish, and investors’ confidence is lower than ever before. It’s no wonder that being upfront and more transparent is a dire need for both seasoned investors, as well as those who are new to the game. And because the JOBS Act has made it possible for retail investors to participate in offerings once reserved for accredited investors, there will be many new players.
Adding to marketplace fears are advances in fintech and online investing technologies that are also fueling a greater demand for transparency. Les Andrews, CEO of Aitken Asset Management, states in a recent MorningStar.com article, “I think you’re going to see more and more demand from investors for details around underlying assets held in portfolios. Both tech and fintech are shifting rapidly, contributing to the rise of savvier, more discerning investors.”
By transparency, investors mean clear, honest and direct communications that are provided on a consistent basis. They also want regular information about fees and/or other transactions related to their investment deals. And finally, they want easy to understand investment reports that provide them with clear insights on their financial performance.
From the inclusion of an onsite glossary, to a detailed FAQ, below are four crucial steps to take in increasing financial transparency for your investors.
1. Draft A Very Clear Fee Schedule
A full 35% of investors in a new study express concern over the dependability of the information they receive from their advisers. This extends beyond actual performance into the realm of fees and commissions charged. Investors also frequently express concern over full transparency around alterations in fees and similar changes.
If you sense a potential opportunity to set yourself apart, you’re right on track. By drafting a clear fee schedule and reviewing it with all new clients, you give yourself the opportunity to stand apart from the crowd, in terms of professional competence and transparency. Ideally, you should do everything you can to communicate solidarity with your clients’ financial well-being. Transparency can play a considerable role in that.
When laying out your fee schedule, remember to keep it as immediately comprehensible as possible. The financial sector tends to be associated with long, mandatory slogs through miles of fine print. This is another opportunity to stand apart from the crowd and will likely make you seem much more upfront about transparency.
2. Create a Detailed FAQ Page
Putting a detailed FAQ page on your site regarding your investment philosophy, fund history, the investments in your funds, and other frequent inquiries could simultaneously serve your aims in multiple ways.
For one thing, it would likely offer a large boost to your “transparency factor”, which alongside trust can be another criterion in an investor’s selection process. Creating a detailed FAQ page can powerfully (and conveniently) communicate to your investor base that their full comprehension of what’s being done with their money is a priority to you.
It’s a simple but powerful truism: people work hard for their money, and they tend to have plenty of questions in store for anyone who comes to them with an investment deal. If you can immediately refer them to a comprehensive FAQ page, it usually communicates a large degree of empathy for their position. You present yourself as having thought in advance (and in depth) about the core concerns of the investor, their primary inquiries, and the best ways to provide clear answers and transparency.
Common inquiries for your FAQ could center on financial barriers to entry, different deal tiers you have available to investors, financing options, and more.
3. Have All Relevant Paperwork Readily Available
Similar to creating an FAQ, when you have all relevant paperwork easily available, a sense of transparency can be conveyed to the clients. You’re likely to appear professional and organized, but also eager to give your clients the info they need.
This has great potential to give your “transparency factor” a healthy lift. It can also provide an overall boost in your own efficiency and peace of mind, since the clients know offhand where to find all relevant documentation. Whether you’re dealing with the many and varied forms, which need signing in the course of investing and deal-making, a recent report you want to review with a client, or anything else of importance, you should have ready access to it once you’ve established its significance.
If you make a habit of this, you have the potential to make your day-to-day operation far smoother, and convey transparency to your clients, as well as an eagerness to quickly get them the info they need.
4. Host An Onsite Glossary
The world of investing (and finance generally) can be full of jargon and convoluted language. Even for accredited investors, keeping up with new developments in the markets (not to mention fintech) can be daunting.
By hosting a glossary of finance and investment terms on your site, you present yourself as being a “one step ahead” kind of thinker. However, in order to take full advantage of this transparency tactic, you should approach your glossary with a few guidelines in mind.
The primary litmus test for each glossary term should be, “How relevant is this to my investors’ concerns and needs?” The aim of your glossary is to clear up your clients’ questions and uncertainties and to increase your transparency in the process. However, this can only be accomplished if the terms you select reflect common misunderstandings or concerns among your investors. Be selective in your choice of terms. And of course, keep abreast of new terminology that investors are likely to be inquiring about.
A good rule of thumb to follow here is to keep track of how frequently certain words and terms come up as points of confusion. You could, for instance, have a threshold of five in place: “If five separate investors express confusion about the same term, I’ll add it to my glossary.”
If approached intelligently, an onsite glossary has the potential to greatly increase your clients’ sense of your professional transparency.
Along with trust, transparency can be a primary deciding factor for many investors when searching for advisers or investment opportunities. This will likely grow to be even more the case as fintech (and technology overall) makes information more quickly and easily accessible to investors.
The good news is that you have the opportunity to be proactive and to align yourself with this trend by reassessing and fine-tuning your own transparency level. You could do this with an on-site glossary of commonly misunderstood terms, by limiting or doing away with “valueless costs” such as commissions and upfront loads, and more.
The main thing is that you keep transparency in your mind as a primary ethic of professional care. By doing so, you can potentially stand out from your competitors and keep your clients satisfied and loyal to your organization for the long haul.
Do you have any questions? Speak with an Investor