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interview part 3: information for investors

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This is the third part of my interview with Christopher Traulsen of Morningstar UK. The first part can be found here and the second part here.

In the final part of my interview we talked about what could be done to improve the level of investing knowledge in the UK. He suggested that fund managers could do more to make their products easier to use and do more marketing on the level of risk involved rather than leading investors to chase past performance.

However, he also pointed out that fund management companies are essentially in the business of selling funds so there is more responsibility on the FSA to get involved in educating investors and maybe there should be some government funded education programmes.

Christopher then also highlighted the role of the mainstream media and organisations like Morningstar in providing impartial opinions on investments and investing. In fact part of his work in Morningstar UK is to provide educational pieces (such as this one on ETFs). This led me to ask him what audience he had in mind for his articles. According to Christopher, the primary audience he envisages is the individual investor and his first key question in determining whether he has explained everything sufficiently clearly is ‘Would my mother understand this?’ He also seeks to provide enough detail that the article would be of use to a sophisticated Independent Financial Advisor since he is aware that they probably form the largest readership.

An example Christopher gave of the level of explanation he would give is that when discussing Fixed Interest products there is a factor called ‘convexity’ which can be important. He would never introduce this concept without explaining it clearly. (And no, I’ve got no idea what it means either.) He seeks to avoid jargon wherever possible.

We discussed the importance that Morningstar place on independence so that they are trusted by the individual investor. Christopher told me that the company began in the US by providing qualitative research for investors and that ‘investors come first’ is one of their key values. To this end and to maintain their impartiality they rate funds without payment and their business model derives its revenue from their premium web service and products for professionals and institutions. They maintain a ‘Chinese wall’ between their sales and analysis firm to avoid any conflict of interest.

I finished the interview by asking Christopher what was the best thing about his job. He replied that he’d never thought he’d get to wear the white hat whilst working in finance and that he most enjoyed helping investors make better decisions.

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One comment for “interview part 3: information for investors”

  1. Every profession has its own jargon but yeah save it for your fellow experts and give the uninitiated and unwashed masses some clear and easy to grasp information. And do it without talking down to us.

    Posted by AirJordans | November 21, 2008, 6:50 pm

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