What are the most effective ways to deliver bad news to investors?

Share bad news with investors as you would remove a band-aid: quickly and with brief discomfort, allowing you to swiftly move forward with planning.

Trust is the most important asset in business. Sharing bad news with your investor demonstrates vulnerability and respect. It's never easy but hiding information is the worst strategy, as truth will eventually come out and lost trust is difficult to regain. We are in the same boat, we will either thrive together or sink together.

Ideally meet face to face, if that is practical. As we all know, the better the level of communication the stronger relationship you will have and can build on. Any scenario, however bad it may initially feel, can always create other opportunities. We all appreciate honest and open discussions. I’m sure we all have long relationships/friendships and I feel the key to maintaining and developing them is personal interaction.

Always ring with bad news, they need to hear your voice, your explanation, you can always follow up with a not. Only messaging of any sort conveys the feeling that you don't care.

I always call and talk directly to the client. I also have one or more action plans prepared. It may require no immediate action. Just a follow-up at a later date.

The truth, the whole and nothing but the truth. Bald, hard facts, don't shy away from it, don't couch it in terms and take full and absolute responsibility for what has gone wrong. It happened on your watch therefore it's all down to you.

It’s crucial in our journey to not only explain the causes and consequences of any hurdles we encounter but also to openly acknowledge our own mistakes or shortcomings. This approach, rooted in respect for our clients, aligns with my firm belief that full transparency and honesty are non-negotiable. Admitting an incorrect assumption or a mistake is not a sign of weakness. Instead, it demonstrates a commitment to flexibility and adaptability, which are crucial for making better decisions in the future.

The key is speed. The earlier you surface the problem, the less likely it is to seem like a "big deal". The longer you wait, the greater the magnitude of the problem seems when your investors first discover it. And of course, the worst case scenario is that your investor finds out about the bad news from someone that isn't you! Don't let the Wall Street Journal front-run your investor update.

The action plan is essential. That may include no immediate action. Maybe just a review and follow-up after 30 days. It may be 60 days, 3 months, 6 months.

I could joke and say don’t lol, All I look for is a clear understanding of what went wrong or off plan and a clear plan that makes sense going forward. We are all human and unforeseen issues always arise but it’s about how we respond them.

Ensure that any solutions and deliverables offered are realistic and ensure follow ups are done in a timely manner. Your investors are there to support you and will want to know that you are consistently progressing to rectify/ improve even if different to plan. You have a time period where your investors will really value your openness and transparency - so use it.

If you didn't set expectations adequately or they forgot, re-up your reminding game about the downsides. I just told someone that was forgetting stocks also go down (tis the season) that they need to be prepared to lose 25% of their portfolio from peak to trough (or more) and gave them the dollar amount this means to them, or we need to adjust their allocation. Preparing in advance is preferred to finding out they won't stay invested when the inevitable happens. We don't wait for the drops then give up on investing because this time really is the end. That's pretty much been proven to be I'll advised if you are serious about your goals. Instead, manage your risk levels on the front end instead. Unless you are a trader, then Godspeed.

(a) Providing investors with options, where feasible, can empower them and soften the impact of bad news. Whether it's a choice in how to proceed with an underperforming asset or alternative strategies for recovery, options give investors a sense of control (b) Reminding investors of the long-term strategy and the inherent nature of risk and reward in PE investing can provide perspective. I've contextualised short-term setbacks within the broader, long-term investment horizon, which often helps in maintaining investor confidence.