By Nick Padmore, a writer at The Writer the world’s largest language consultancy
Nearly half of all complaints in the investment slice of the financial services industry are about bad customer service or general admin[1].
Back in 2007 Andrew Ross Sorkin at the New York Times wrote this article, claiming that hedge fund managers used a ‘secret language’ made up of ‘technical-sounding explanations for losing billions of dollars of other people’s money’.
And Freakonomics author Stephen Dubner calls the language of economists ‘deeply obtuse’.
If they’re right, it could be that customer service numbers are through the floor partly because people can’t stand the way financial people talk to them.
That’s what I was asked to find out. I work at a language consultancy called The Writer. Every day we critique and rewrite words from every kind of business under the sun.
I read seven reports from five hedge fund managers[2] and looked for the good, the bad and the ugly.
And I did find examples of the sort of thing Sorkin and Dubner were complaining about.
But I also found some truly brilliant writing. Rich language that paints pictures in your head. Rhetoric. Blunt honesty. Clarity. Pace.
In this article, I’ll explain how to combat the bad and ramp up the good, and give those customer service ratings a healthy boost.
Fixing the bad
1. Watch out for formal words
Howard Marks (writer of one of the seven reports) and Warren Buffet are two brilliant men of finance who are famous for their clear, natural writing.
But in some of the reports, the biggest problems were Latinate words where Anglo-Saxon would do, and nouns that, deep down, really wanted to be verbs. Both contributed to a formal, unnatural tone that made them unnecessarily heavy-going.
Latinate words
we are not being adequately remunerated
we had the resources to effectuate the necessary change
we commenced in Q1
Why not paid enough, make and started?
Nouns instead of verbs
the idea generation process
purposes of risk mitigation
value realisation
Why not generating ideas, mitigating risk and realising value? (Or better still, having ideas, cutting risk and making money.)
It’d be clearer and shorter that way. But there’s more to it than just clarity and conciseness. Using nouns like these weakens your point and clouds the truth:
We have also methodically improved the analyst coverage of our investable universe.
Surely We’ve hired more analysts is more of a draw?
2. Don’t air controversial opinions
The moment bias creeps into your writing you lose trust. And trust is very important when your job is to take risks with people’s money.
In short, politics is dangerous territory (even if many people would agree with your stance):
We have high conviction that at some point in the not-too-distant future, French public finances will start to deteriorate markedly, thanks to Mr Hollande’s irresponsible socialist policies.
US consumers and business owners alike are frustrated by the Obama administration, which is openly hostile to most businesses and unable to articulate or implement policies to spark growth and reduce unemployment.
3. Don’t try too hard
Those who promise a rose garden and try to hide the weeds come across as try-hard and untrustworthy:
We remain committed to our fundamental stock-picking methodology.
We continually push our analysts to come forward with great ideas.
We take our duty as stewards of your capital very seriously.
Anything that smacks of corporate salesiness will make readers uneasy. So instead of saying how committed you are, or how you come up with great ideas, or how you take clients seriously, say something that proves it.
They won’t believe you otherwise.
Boosting the good
And so to the bright side. I found plenty of evidence of writing that really keeps the reader in mind. That’s engaging, clear and warm. But it’s not enough by itself. Here are some writing tips taken from tactics adopted by the very best of the reports.
1. Make it interesting
Clear writing is good, but it’s not always enough. To keep people interested you need to season your writing with a touch of pizzazz. Here’s how.
Metaphor
I saw a brief upturn in the economy described as the eye of the hurricane. The US economy’s deepening trouble as falling off the fiscal cliff and stuck in neutral. And, my favourite, a vivid personification of the market that makes you picture a petulant child:
(The market) continues hoping with fingers crossed that kicking the can down the road will ultimately be a winning proposition.
Metaphors let you explain complicated things in terms of simpler, comparable things. And as a bonus, they’re really persuasive too[3].
Use them and you’ll be doing the heavy lifting on your reader’s behalf.
Colourful words
Pretty horrific; get out of this mess; a treacherous and tiring environment; squeeze upwards; get cooking; gone crazy; roiled the markets.
Use them. They keep people interested.
Pace
By pace, I mean varying the length of sentences. Here’s a brilliant example:
It doesn’t feel like the silly season is back in full. Investors aren’t euphoric. Rather they seem like what my late father-in-law used to call “handcuff volunteers” – people who do
things because they have no choice. They’re also not oblivious to the risks that exist. I imagine the typical investor as saying, “I’m not happy, but I have to buy it”.
Medium, short, long, medium, long. It’s a powerful trick for dragging the reader from page to page.
2. Bring yourself to the page
Hedge fund managers are experts in something that’s a mystery to a lot of people. So a lot of customers want to be led.
They want opinions (if not political ones). They want to deal with you, the expert, not you, the representative of a bigger company.
So talk about your experiences
Like these:
In January 2004 I received a letter from Warren Buffett (how’s that for name dropping?).
When I was in army basic training, I was sure the memories would remain vivid and provide material for a great book. Two months later they had disappeared.
We could not resist comparing Bernanke & Co to our children when they are building sand castles in low tide and then try to fight the rising tide.
And have opinions
Like these:
Europe will continue to be in the mess it currently is in, as long as bondholders are treated as sacrosanct.
Unpleasant experiences are the source of the most important lessons.
There’s nothing more risky than a widespread belief that there’s no risk.
3. Be honest
The reports from Noster Capital made no attempt to hide bad news. In fact, they were downright blunt.
Difficult times are ahead of us.
Our three largest equity positions significantly underperformed the market.
The upsetting performance of last month.
All investors know there will be bad days as well as good. So managers who tell the truth when times are bad reassure us they’re doing everything they can to fix it.
4. Have a love/hate relationship with jargon
The good thing about jargon is that it makes the people who use and understand it feel like they’re in the same boat.
The bad thing is that it makes everyone else feel like they’re not wanted in that boat.
So as a rule of thumb, think about your audience before you press the jargon button. Have what Warren Buffet calls ‘a sincere desire to inform’.
If there’s anyone who wouldn’t understand, either cut it or explain it. Like this:
There was also some quarter-end “window dressing”, where many fund managers prop up their equity holdings to paint a better tone to their portfolios.
The capital markets are highly divided about the possibility of the Fed embarking on a new round of Quantitative Easing (read money printing).
Last week we had the third month in a row with an ISM print under 50 (generally numbers above 50 mean the economy is expanding and under 50 the economy is contracting).
This is a really great compromise. It makes a complicated thing clear, and clear language makes you look clever. (It’s true. Just read this paper by psychologist Danny Oppenheimer.)
So there you have it. Follow these rules and you won’t just avoid being deeply obtuse – you’ll come across as more personable, trustworthy and intelligent.
And who ever complained about someone like that?
[1] ‘Aggregate Complaints Statistics: 2006 to 2012 H1’, the Financial Services Authority (27 September 2012).
[2] The manager letters sampled were: Third Point LLC Second Quarter 2012 Investor Letter; Viking Global Equities Second Quarter 2009 Letter; Howard Marks Letter to Oaktree Clients May 2011; Owl Creek Asset Management Investor Letter November 2011; Pershing Square Capital Management First quarter 2012, and letters from European manager Noster Capital for June/July/August this year. The letters from Noster Capital are not publicly available.
[3] ‘The Persuasive Effects of Metaphor: A Meta-Analysis’, Human Communication Research, Pradeep Sopory and James Price Dillard (2006).
Some very useful pointers here. I used to do a lot of editing of investment managers’ writing, and these points were some of the hardest things to get managers to take on board because they are subjective, and most investment managers prefer objective arguments. Most people write with only themselves in mind as readers, unless they are professional writers.
But other pitfalls are more technical. It’s incredible how selective investment managers’ memory becomes when they lose money, and fact checking at the editorial stage is vital. That means cross-checking statements with portfolio and market movements to see if they makes sense.
Market commentary is necessary and important, but it’s not unknown in down months for managers to write more market commentary in the section for explaining why they did what they did, and what happened to the portfolio.
Some good tips that can be applied to all dealings with investors.
In a recent Ernest & Young survey on hedge funds investors highlighted better communication and transparency as two core components of creating better relationships with hedge funds and investing in new hedge funds. They also identified hedge funds that invested in their own front and back-end systems such as wealth management software as appealing; indicating that investors are looking for better business practices and faster reporting.