Chief Investment Officer or Chief Inquiring Officer?
The investment industry loves opinions and those with answers.
It tends to give much less attention and recognition to the process of questioning.
The view seems to be that questions are easier, answers need the intellectual horsepower to illustrate how much we know. Questions are associated with the lack of knowledge on a sector or theme and to admit you don’t know is often thought as weakness.
In my view the industry has it biased the wrong way round. Anecdotally, I have found the better the CIO in asset management the more they tend to differentiate by a structured approach to questioning investors ( I, of course, am biased!)
Socrates, born in Athens in 470 BC is often credited as the father figure of Western philosophy, his largest contribution to modern society seems to have been his Socratic Method. It’s a form of inquiry and discussion between individuals based on structured questioning to illuminate concepts or ideas.
In my work with investors the vast majority of time involves posing question after question about an investment process. These questions are structured and there is a plan behind them. The goal is to clarify and guide, enabling the PM to take responsibility for enhancements to this/her process.
Without doubt, the role of a CIO is multifaceted. Understanding client needs, assessing the cycles, allocating assets and asking for lots of information from PMs are just a few of their responsibilities. However, unlike lawyers or journalists they are not trained to ask questions and most don’t think of it as a skill they need to develop.
It’s an opportunity to differentiate and above all, add value to clients.
I have helped CIOs create their own Socratic process for PM meetings that unlocks mutual learning and if done well, enhances the relationship between both parties. This process is equally applicable when adapted to client meetings.
Here is a small excerpt from one CIOs newly created Socratic process with an equity PM:
CIO - Whats your best idea currently in the Growth Fund and summarise why you really like it - but keep it to less than a minute please?
(Most PMs struggle to do this succinctly)
CIO - Give me another holding you own in the Growth Fund you like, but have less confidence in - summarise please in less than a minute?
(Most PMs find this even harder to do succinctly)
CIO - All our PMs, as you know, have names they really like, some they like less and others they own in funds that are very low conviction. But few PMs seem to be able to SHOW me EXPLICITLY how much they like an idea at any given time. Does that surprise you?
CIO - Can you quantify how much less you like the second idea versus the best idea in the fund and please keep it to less than a minute?
(Many PMs when I ask this look bemused !)
CIO - Would it help if we went through a framework at a later date, to help you better communicate this ?
Most PMs jump at the chance.