Skills That Separate You as an Investment Manager: Forthrightness

Once you've finally landed that coveted position as a research analyst, how do you stand out from the crowd in this highly competitive field? Many of the skills needed for a successful investment management career are not taught in business schools, and so I've been enumerating the unconventional skills you will need to build a successful career in finance. Thus far I've covered:

• Introspection
• Creativity
• Intuition
• Decisiveness
• Absolute vs. relative decision making

In this installment, we will discuss forthrightness.

Forthrightness

You may have mastered all other skills necessary for successful investment management, but knowing, and communicating that you know something, are entirely different skill sets. Translating the insights of the right brain into language — a more linear form — takes tremendous skill. Here investment professionals are able to speak the truth of what they think and know in such a way that the often abstruse thought processes of investment analysis are made clear for listeners, such as portfolio managers, chief investment officers, and boards of directors. Forthrightness differs from honesty in that it insists that investment managers speak the truth as they see it and to volunteer their opinions without heavily filtering the message. When you consistently take this approach, decisions become easier to make because people seem to have an innate sense of the truth of your statements.

A Model for Cultivating Forthrightness

If you want to be more forthright and for your words to ring with truth, try working with the following mental framework. Words are typically perceived as authentic by listeners when the following five states honored evenly: inspiration, imagination, thought, word, and deed.

• Inspiration is the “aha!” or “eureka” quality that comes with true discovery.
• Imagination is inspiration combined with knowledge and experiences to discover new ideas; many think of this as creativity.
• Thought is the creation of architecture meant to make the initial inspiration and commensurate imagination a structured reality.
• Word — as in “I give you my word” — is a meaningful commitment and responsibility to make real the original inspiration.
• Deed is doing the hard work to make an originally intangible idea a tangible reality.

When each of the five steps are in place and working together seamlessly, then magical things can happen for investment managers. This includes: changing the asset allocation of a portfolio; or creating an ideal set of questions with which to pepper an intransigent business management so that you get to the truth of a situation; or developing a new way of looking at all businesses that leads to new analytical insights; or divining what to write to your shareholders in your semiannual report so that it conveys your true regret at a bad decision — but in such a way that you get to keep your job and restore trust.

Application of Forthrightness

As a part of the original job candidate materials I submitted to my first employer in finance, I included a copy of my master's thesis. I concluded that active managers outperform passive managers — contrary to popular opinion — so long as you use downside measures of risk and not measures of volatility in calculating Sharpe and Treynor ratios. During a subsequent in-person interview for that research analyst job, my interviewer turned to me and said, “You know I think your thesis is a load of bull!”

I took a deep breath to dissipate my emotions and to center on some inspiration. Namely, I did not feel that my interviewer read my thesis; this was my inspired insight. Knowing what I knew about the firm — that they were active managers — I could not imagine that he had read the thesis. I then remembered that when I entered his office for the interview he was on a conference call with a company and that he was then busy checking e-mails for a while, keeping our interview at bay; this was the ‘thought’ stage of forthrightness. I also committed myself to challenge him on whether or not he read the thesis (the word phase), and then replied (deed phase), “I don’t think you read it all the way through, because it actually advocates strongly for the power of active management.”

Normally the advice given to interview candidates is to be a shrinking violet and to not challenge the interviewer. But in this instance, my words resulted in the interviewer blushing and then saying, “Well you are right. Why don’t you tell me what your thesis is about?” I eventually received a job offer, which I accepted. This is the nature of truth when it is spoken: It cuts through abstruse layers of conversational and intellectual confusion.

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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