In 2019, PwC released its first-ever Global Crisis Survey with responses from more than 2,000 senior executives in 43 countries. When asked if they expected to be hit by a crisis in the future, 95% of respondents said “yes” (an uncomfortably accurate prediction). Imagine the shock experienced this year by the remaining 5% of respondents who basically said, “Nope, can’t imagine any business catastrophe affecting us.”
In this pandemic, and in any crisis, some events are beyond our control. Your firm can’t quell the economic turmoil. But it can control something essential: the message to investors. To that end, investment managers can take important steps to strengthen relationships now and prepare for future crises. In this blog post, we examine ways your firm can transform this time of profound uncertainty into a powerful opportunity to reinforce trust.
START WITH A COMMUNICATION FOUNDATION
Trust is the ballast that keeps your business relationships steady. It develops from a continual process of effective investor communication, and that process should begin the moment a partnership forms with an LP. The advent of a crisis is the wrong time for firms to start building trust. Firms need a pre-existing foundation of confidence to help LPs perceive a capable hand at the wheel when the terrain gets rough.
To solidify trust from the outset, investment managers must understand how much LPs value transparency. Communication needs to go deeper than regularly scheduled updates. Consider scheduling one-on-one time with investors to convey detailed information about performance and reinforce your investment strategy’s success.
HAVE A PLAN IN PLACE
Assume that another crisis will emerge for your firm. Even if the pandemic magically disappeared tomorrow, firms need to expect the possibility of other threats, such as cyber-attacks or employee sabotage.
Create a PR crisis plan, so your firm has a basic framework for how to respond and who will execute it. This will enable a swift, disciplined communication approach. That matters because long periods of silence will only amplify feelings of uncertainty. For crisis communication, the adage “Fail to prepare, prepare to fail” holds true.
During a crisis, effective communication does not mean immediately having the perfect response to every investor question. Pretend to have all the answers, and you will likely erode trust. But, do follow up on questions that require more attention. The goal is to provide reassurance — and investors will sense that from thoughtful, thorough replies that indicate your firm is vigilant and monitoring the situation.
CUSTOMIZE YOUR INVESTOR INTERACTIONS
Some firms think “crisis communication” means informing investors of an adverse event. But that’s just the beginning. To position your firm as a proactive problem-solver, organize weekly calls with LPs. In addition, create opportunities to have one-on-one interaction with investors and determine their communication preferences. Frequent updates are essential during a crisis, but if an investor prefers phone calls to email, refrain from flooding their inbox.
Whatever mode of communication you choose, don’t become a firehose of meaningless updates. Although crisis management requires action, those actions will be misguided if firms forget the value of listening first. Remember, your investors have feelings, biases, fears, and they need to be heard. During this crisis, investors are performing their own triage. Ask what they’re most concerned about and focus on delivering that information. Show you’re engaged in their best interests and be open to their opinions. To guide those conversations, consider this Stephen Covey quote: "If I were to summarize in one sentence the single most important principle I have learned in the field of interpersonal relations, it would be this: Seek first to understand, then to be understood.”
This is a time of great market stress and also an excellent time to reinforce LPs’ trust. Firms can navigate uncertainty if they build investor trust at the start of the relationship, prepare a crisis response, and provide frequent, meaningful communication. Genuine concern for investors’ interest will strengthen confidence, serving your firm well through this crisis and beyond. Much has changed with the global economy this year. But one thing that’s stayed constant is the need to strengthen investor relationships through consistent, meaningful communication.