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This groundbreaking new book answers an essential question: why is it that a fund client selects, or an investment consultant recommends, one asset manager over another when the two are, on paper at least, very similar? Also, why is it that some asset managers maintain their mandates during difficult periods in the cycle and others don't, even though their performances are identical?
Authors Herman Brodie and Klaus Harnack investigated the drivers of these selection decisions and uncovered that so-called 'soft' factors play the primary role - even more so for consultants than for end-clients. They also discovered that these soft factors are essentially the means clients use to judge an asset manager's benevolent intentions, one of the two dimensions of the universal human evaluation more commonly known as trust.
Backed by compelling data and research from multiple disciplines, The Trust Mandate breaks open the science of trust for asset managers, revealing the systematic steps clients take in their search for evidence of good intentions - the essential, but often missing, component in business relationships. It also shows how trusted managers are able to win more clients, keep them longer, merit good recommendations, allowed to take more risks, and justify higher fees.
The clients of trusted managers enjoy reduced anxiety, earn higher long-run returns, and avoid costly and pointless transitions from firm to firm. So high-trust relationships are a genuine win-win situation. Yet the task of initiating and nurturing them falls squarely on the service provider. Asset managers must learn to convey their good intentions. The Trust Mandate shows why - and how - in unprecedented detail.
About the Author
Herman Brodie spent over a decade in investment banking roles in London, Paris and in Frankfurt. In 2000 he co-founded his first company, Cognitrend, a consultancy to advise financial institutions on the utilisation of behavioural finance research. He has pursued this goal since 2013 as Managing Director of Prospecta Limited. Brodie is a co-author and lecturer of 'A Practical History of Financial Markets', a course aimed at investment professionals,
developed for the Edinburgh Business School's MBA programme, and has penned numerous articles on behavioural finance.
Klaus Harnack received his Ph.D. in social psychology and motivation from the University of Konstanz. He is currently lecturer and academic counsellor for work and organisational psychology at the University of Muenster. Besides his academic work, he provides interdisciplinary knowledge transfer for a wide range of professionals. His utilises psychological insights and strategies to support professionals in their decision-making, negotiation and conflict management skills. He is an author and scientific columnist.
“Too many fund managers ooze competence but lack warmth. Big watches, showing off superior intelligence and bragging about past winning trades put clients off. Instead, we should learn from the firefighters, who are heroic and trustworthy. I have known Herman Brodie for several years, having attended his ground breaking courses on behavioural finance. In this book, he doesn’t disappoint... Genuinely a worthwhile read for investment professionals. And if they all read it, pitch documents would no longer be so bland.” —Charles Morris, Chief Investment Officer at Newscape Capital Group
“One of the Ten Best Business Books of 2018 for Financial Advisors” —WealthManagement.com
““A book I highly recommend”” —Larry Swedroe
“A fascinating subject … I recommend people get hold of this book and read it” —Martin Bamford