Now For Something Different: Morningstar’s Performance Clock

The old way involved closed doors, guarded discussions and hushed voices until an organization was ready to unilaterally spring change on its business partners and customers. (And we wonder why that didn’t always work so well?)

That’s not how change is introduced today. More often than not, the new way starts with an idea—sometimes not fully baked—and involves pilot tests, trial balloons, beta launches and other forms of vetting by "the crowd."

For example: Have you seen the “performance clock” published in the February/March 2015 Morningstar Magazine? This link will open page 34 of Morningstar’s Nxtbook magazine reader, you might need to give it an extra second or two.

The performance clock offers a different way of looking at monthly returns of indexes or securities over time. It appropriates the face of an analog clock, showing monthly returns for the 12 months of a calendar year. The length of each line shows the absolute performance for each month. January is at the 1 o’clock position. Green lines present positive months and negative months are shown in red. When the returns or losses are small in some months, the lines very short.

“We’re thinking of making it a regular feature in our Data Dashboard toward the back of the magazine,” Editor-in-Chief Jerry Kerns told me in a response to an email I’d sent. “It would track the performance of [market] indexes throughout the year.“

In the note accompanying the feature in the magazine, Kerns asked for feedback, including whether Morningstar software users would want to see an interactive visualization. Per the new way, why invest programming resources unless there’s some demonstrated user interest in it?

Morningstar acknowledges that the visualization conveys the same information as a standard bar chart. In answer to a direct question from me, Kerns said, “I think it could replace monthly bar charts. It hammers home that volatility comes not just from the downside.”

Kerns elaborated, “I think the clocks work best when they’re being used to compare or provide context. Say that the performance of two funds with similar mandates is correlated—both funds produce positive and negative returns during the same months. But what if one fund was more volatile—its up and down months were more extreme? The performance clocks of these two funds, presented side by side, would show that. The volatility of the one fund would really stand out.”

I like the clocks and found myself spending much more time with them than I would with bar charts. I appreciate new efforts to aid investor understanding. At the same time, I should admit that I’m a pushover for whatever's new.

Does The Clock Toll For You?

Every mutual fund and exchange-traded fund (ETF) marketer knows to keep an eye on what Morningstar’s up to. In fund communications alone, we have Morningstar to thank for introducing the style box (in 1992, according to this corporate PDF) and of course there are the star ratings that appear on most fact sheets and fund profile pages.

I wouldn’t rule out the possibility that a new and improved visualization from Morningstar might eventually influence your presentations of market or fund performance.

Who else has a say in how fund companies present data? The financial advisors who distribute your products, the wholesalers who represent them, FINRA, Compliance, your fund data automation vendor, in-house designers all have a stake, too.

Just to test the waters, I reached out and asked Synthesis and Kurtosys, two marketing communications automation solutions providers mentioned here before—see this post and this—for their reactions. These people are information design professionals, with the battle scars from having to automate scads of data, graphics and text for an array of asset manager communications. They are not easily impressed.

“How would the performance clock work, either in fund fact sheets or online?” was what I wanted to know.

Some Reservations

Stipulated: There’s no doubt that a tabular presentation of fund return data is the most complete information a fund company can provide. If the clock visualization was used to present fund performance and/or index performance, it would likely be supplemental as most fund company graphics are.

Even so, the fund automation vendors have their reservations.

On the plus side, said Synthesis product manager Noel Rodolfo, “One of the benefits of this chart is that it should take up less real estate than a bar chart (even with data labels added, as I would suggest). And the clock hands’ length is the absolute value since positive/negative is denoted with a color. Nice, that will save some space.”

However, Rodolfo noted that reliance on color alone for positive and negative returns will be a challenge for the color blind. Ultimately, he thinks a benchmark comparison—involving two clocks side by side—will be more difficult and take the user too long to analyze the differences.

“I’ve seen these charts used by the fund ‘technicals’ on an institutional level, at French and Swiss firms mostly,” said Matt Stone, marketing director for Kurtosys.

Stone called clock charts interesting but confusing. “They save space and can help report on seasonality, but they are frighteningly hard to read for most. Both the positive and negative values go in the same outward direction.”

Stone said Kurtosys doesn’t see much reinventing of the wheel related to fund performance. On the other hand, marketers are turning to infographics for “the freedom to experiment and be more original. But the aim,” Stone reminded, “should always be to provide clarity, precision and efficiency.”

Your turn—whether you’re a marketer, financial advisor or Other—to weigh in on the performance clock. Your comments are welcome here, of course. You might also want to share your thoughts with Kerns. After all, early response from our crowd should be the benefit of Morningstar’s providing a first look. 

The Marketing Tech That’s Enabling Sales: Personalized Emails, Pitchbooks

My first encounter years ago with John Toepfer of Chicago-based Synthesis Technology triggered some conflicting emotions. 

Naturally, I welcomed him and his technology that promised to free marketing communications from the shackles of the mutual fund performance data quarterly updating process. 

“With this, we’ll have time to do what marketers should be doing,” I remember saying and, as far as I remember, all nodded in agreement. Yep, none of us fully grasped what we were in for. 

John ToepferThings got uncomfortable when it became clear that Synthesis wasn’t just going to help Fund Accounting, Investment and Compliance get their acts together—Toepfer and team intended to impose standardization and processes on Marketing. 

Well, it all turned out just fine in the end. A 45-day all-hands-on-deck updating process (!) was whittled down to 10-ish days. The work helped form my conviction that Marketing benefits from exposure to the structured thinking that technology requires. 

My path has crossed with Toepfer’s a few times since that first gig. The automation of fund performance communications is standard practice at fund companies now. But Synthesis and other vendors continue to find new ways to improve upon the efficiency and accuracy (“wouldn’t it be nice to review that data just once?”) of what can be soul-crushing work for marketers. 

Here’s a quick catch-up with Toepfer. It's difficult to ask any tech provider what's going on without getting the answer framed in the company's latest solutions. I expect that, I appreciate the free peek at what firms are doing, and hope you do, too. Know, though, that I have no business relationship with Synthesis.

For Synthesis’ ongoing views about investment management and technology, by the way, read the firm’s excellent blog.  

Q. So, John, what’s new? What are the smartest mutual fund and exchange-traded fund (ETF) marketers working on lately? 

Marketing for investment management firms these days is all about two things: personalization—making sure that you’re communicating with the client in a highly personalized and relevant manner, and content—showing those clients that both the sales team and the firm are thought leaders in the industry. Any technologies that support these goals are hot. 

Q. Such as…?

For example, we are developing a solution for a client that enables sales teams to construct highly personalized emails to their clients. The benefit of this tool is that it blends the branding, promotion and compliance aspects of a marketing email program with the advanced personalization aspects of a sales email. 

Email marketing trends point to this idea of advanced personalization that goes beyond just first name merge tags and list segmentation. Marketing teams have the tools and expertise to create compelling email campaigns, run tests, analyze and optimize. What they’re lacking is the familiarity that comes with face-to-face exposure to the client. Wholesalers have more qualitative information about their clients’ unique interests, needs and goals.

This solution is a perfect opportunity to combine the qualitative and quantitative expertise of both the marketing and sales teams to deliver valuable content to the recipient. Advanced personalization that leverages the unique talents of the sales team will no doubt increase the effectiveness of these email campaigns.

Q. John, it sounds as if you’re branching out—from enabling Marketing to enabling Sales. 

That’s right, and there is a lot of buzz about sales enablement right now. 

As another example, smart firms are making room in their budgets for sales enablement technologies like pitchbook automation, if they haven’t already. 

A centralized presentation management system that allows marketing teams to develop a library of presentation slides that automatically update and refresh with the receipt of new data or disclosures can take the chaos out of updating slides. Ideally, this system should be flexible enough to incorporate a firm’s unique business rules and processes for quality control. 

Sales teams should be able to access this system from any geographic location and device to very quickly and easily build presentations that are highly targeted to their audience, while also compliant and on-brand. A system like this saves the marketing team a lot of time and empowers the sales organization to create highly personalized presentations that drive more sales. 

Over the past few months, we’ve seen a surge in pitchbook automation inquiries. I think there are a few reasons for this: 

• First, there is heightened awareness that this technology exists. More than a handful of technology companies are popping up that focus solely on sales enablement tools. This has brought a lot of healthy competition as well as validity to this business.   
• Second, the industry expects a mobile aspect to the solution at this point. Although many salespeople (and clients for that matter) still prefer the tangibility of printed documents, the trend is clearly going paperless with the ability to push presentations to a wholesaler’s mobile device.
• The third trend is that software providers are realizing the value of providing data management services in addition to the content management and publishing solution. Many clients still struggle with getting the data into one clean, consistent form and location.  

Q. Are there any other examples you can talk about? 

One of our pitchbook clients is a private banking group of a major New York-based asset management firm. A three-person marketing team is efficiently managing a very large catalog of sales materials to meet the content needs of 900 users in 20 branch offices.  

With a few clicks of the mouse, financial advisors can access a constantly updated catalog of sales materials and any account-specific data, personalize their presentations, and be assured that the material is compliant from branding, disclosure and data perspectives. 

One of the largest factors in the success of the system is its single sign-on connection with the firm's CRM. The two primary measures of success for systems like this are system adoption rate and efficacy of materials. Both of these are improved when the solution is well connected and aligned with the CRM. 

These screenshots show the capability within SalesForce but similar integrations with other CRMs are possible as long as the platform has a good API and can support single sign-on.

Once the presentation has been created and finalized, it is stored and recorded at the account record level. This is advantageous to the sales professional because it allows him or her to associate a specific presentation with a specific pitch to go back and refer to later without having to access two different systems. (For more on the pitchbook strategy, check out Synthesis' whitepaper.)  

Q. So, what would you identify as the obstacles for marketers eager to deliver both personalization and content? 

No industry is immune to the challenge of aligning Sales and Marketing. In the investment management industry, you add in the compliance aspect, which makes it even more difficult for firms to align their strategies. 

In our experience, the big issue for marketing teams is managing and producing all of their content in a way that satisfies the needs of both Sales and Compliance. Marketing communications need to be highly effective and accurate. Salespeople want the right materials right when they need it and they also want customization. 

Typically, it is a major challenge for marketing teams to provide a high level of customization on sales materials due to time and resource constraints. Thus, we see companies either limiting customization by size of opportunity (only the big deals get custom slide decks) or turning a blind eye to how the sales force might be customizing things in the field. 

The first solution is a bad idea from a sales efficacy standpoint. The second solution is a compliance nightmare. Compliance departments are very conservative, which makes it difficult for Marketing to even mutter the words, “customized” or “automated.” 

The trick to getting these three groups into alignment is to find a way to effectively manage their content (and product data) in a centralized location that allows for controlled, shared, and reusable content.