Stories that sell: Data visualization in fund marketing and client reporting

“Much of the wealth management industry profits from making simple things complicated and then charging to translate them.”
  — Nick Hungerford of Nutmeg.com (BBC radio 4 interview)

Most people think fund management is complicated.
Regardless of whether it is genuinely complex, or simply made to seem that way by the industry itself (and we’ll return to Nick Hungerford’s potentially controversial view later), most clients appreciate some help when it comes to accessing and interpreting data about their financial health and wealth.
The whole client reporting machine exists to achieve just that. Fund factsheets summarize performance, client reports explain fund allocation choices and market movements; in fact, almost every communication a client receives from a fund manager is designed to convey complex information in the best possible way which is why the subject of today’s blog is stories.
We’ll be looking at why we tell stories and exploring why visual stories often tell the most compelling messages of all.

Mirror, mirror, on the wall, what’s the most famous fairy tale of all?

A quick Google search fails to provide any reliable consensus when it comes to picking out the world’s favorite fairy tale. What it does do, however, is emphasize just how universal these tales are. Yes, the names and places might change but right across the globe, the same fairy tales get passed down from generation to generation.
For example, did you know about Yeh-Shen, a Chinese girl who is starved and over-worked by her wicked stepmother. She’s forbidden to go to the annual spring festival until, at the last minute, a spirit grants her a beautiful gown of azure blue and delicate golden slippers and announces that yes, she shall go to the ball. Sound familiar?
Most experts think fairy tales exist to help children explore complicated issues like death. Of course, the real reason they endure is that they are great stories and everyone loves stories.
Stories help us understand and apply information. They help to communicate complex issues in a way that we can understand and draw meaning from.

Pictures speak louder than words

When you think back to the fairy tales you heard as a child, the chances are that you remember a visual image, of Cinderella or perhaps the Three Little Pigs. The pictures stick in our mind and help remind us of what’s important – the story. Likewise, when small kids flick through fairy tale books or watch a Disney film, the visual cues are larger than life, more important even than the spoken dialogue.
The analogy might seem stretched, but it’s the same when it comes to visuals in client reporting.
David McCandless, a self-styled “data journalist” whose name has become synonymous with data visualization thinks that’s because “it’s effortless, it literally pours in”
In his terrific TED talk on data visualization, the author of Information is Beautiful explains why the visual elements of a story – or report – are so important.

Source: David McCandless

This image explains what McCandless refers to as the “bandwidth of senses”. Put simply, the small white dot at the bottom right is what we’re consciously aware of responding to when we read a piece of information, such as a fund performance summary. The other sections are color-coded according to which of our senses we use to interact with the data. Unsurprisingly, taste doesn’t feature too highly! Sight, on the other hand, has a huge bandwidth. In McCandless’s analogy it’s like comparing the bandwidth of a computer network to that of a calculator.
We are extremely sensitive to patterns, shapes and color. Combining those elements with numbers, words and explanations can lead to extremely powerful results. It’s like combining two powerful languages that are simultaneously understood by different parts of our minds in such a strong way that it becomes much easier to alter understanding, perceptions and behavior.

Visual stories can quickly establish context (data visualization thwarts complexity)

Data and numbers are meaningless without context but visual elements offer a speedy solution. David McCandless was frustrated with media reports of billion-dollar spending that he could never quite get his head around.
His solution was to use boxes scaled to correlate with the size of spending they represent and color coded according to what the cash is spent on:
Suddenly, the picture gets a lot, lot clearer.

“Data is the new soil”

All of which leads McCandless to conclude that far from data being the new oil – a line that’s often repeated – data is in fact the new soil.
While data is a ubiquitous resource for insights that can be mined like oil – data is also like loam as it’s a fertile, creative medium to be worked and tended.
Just like soil, data is often only as good as those who tend it. Information can be well looked after and turned into beautiful data visualizations…

Source: www.informationisbeautiful.net/books/

Or it can be used badly to skew results.

It’s not just the data but the questions that count

Which brings us neatly on to the choices facing those who present data.
In the same TED talk, McCandless illustrates this point by comparing the results of asking two inter-related but very different questions when thinking about which country has the biggest army.
First he asked who has the most soldiers? No surprises there. China is well ahead of the pack.
Data Visualisation of soldier count
But then he tweaked the question to ask who has the most soldiers per 100,000 people?
Who has the most soldiers per 100,000 people
As you can see, the answer is strikingly different. China now drops from 1st to 124th position!
Armies might well be a little more emotive than financial reports but the point is just as relevant for asset managers.
As custodians of fund factsheet production, marketing teams are tasked with determining the right questions to ask, deciding which data to share and choosing the right method of presentation. Those are difficult things to get right. Throw in issues of color, shape and design and it becomes a case for the experts.

Simple sells

So about that quote we promised to return to…
Nick Hungerford helped create Nutmeg.com, a UK-based online discretionary investment management company that emulates the slick UX, visual design and transparency of Mint.com
Mint relies on data visualization to bring people closer to their money:
Mint.com personal finances example
And Nutmeg uses a similar visual experience of consolidated assets and simplify the process of setting up a fund as it guides clients through the process:
Deciding what to invest for…
Nutmeg.com 1
Understanding projected performance… and risks!
Nutmeg investment settings

And drilling down into the detail of allocation
Nutmeg investment allocation pie chart
Both brands have achieved a simplicity that sells.
Personally, I think it’s a stretch to say traditional fund managers deliberately complicate financial affairs as Hungerford proposes. There’s an ROI in turning complex data sets into simple, elegant illustrations. Clients are being exposed to more clear, visual storytelling in everyday online interactions, and demanding more clarity from the asset management world.
Why? Because it’s persuasive. And beautiful data can help to create beautiful relationships.
Next time… some graphical design advice from the master of visual representation, Edward Tufte.