In his latest, and highly thought-provoking, piece JB Beckett lifts the lid on Forensic Statement & Linguistic Analysis, the cutting-edge discipline helping advisers, fund selectors and asset managers detect deception in corporate reporting. From boardroom spin to subtle linguistic cues, JB reveals why the future of fund research could depend as much on what’s said as on what’s shown.
In the shadowy corridors of finance, where numbers dance and narratives twist, truth is often a casualty. Asset managers, fund selectors, and financial advisers are trained to read balance sheets, dissect ratios, and model risk. Just as we have grown accustomed to the idea of behavioural finance; and the human condition, what if the most revealing insights lie not in the numbers, but in the words?
Welcome to the world of Forensic Statement & Linguistic Analysis (FSLA). FSLA is a discipline that’s quietly revolutionising how we interpret corporate disclosures, assess risk, and conduct due diligence. At the forefront of this movement is Deception Detection Lab Limited (DDL), a UK-based firm blending linguistic science with financial acumen to uncover deception in corporate communications.
Lies, Lies and Damn Statistics
Traditional financial analysis is built on the assumption that numbers don’t lie. But numbers are curated, shaped by narratives, and often buried beneath layers of obfuscation. FSLA pierces this veil by analysing the language used in earnings calls, annual reports, and executive statements.
DDL’s team, including seasoned analysts like Gary Hobbs and Chris Woodruff, apply linguistic techniques honed in criminal investigations to the world of finance. Their work reveals patterns of deception, the passive voice, distancing language, excessive qualifiers, which often precede financial misstatements or strategic pivots.
Take Boeing, for example. In the wake of the 737 MAX crisis, linguistic analysis of executive statements revealed a shift from active responsibility to passive deflection. Phrases like “mistakes were made” replaced “we made mistakes,” subtly distancing leadership from accountability. Similarly, Kingfisher plc, in its earnings guidance, employed vague qualifiers and future-focused optimism that masked underlying operational challenges. These linguistic fingerprints often correlate with future underperformance or reputational risk.
From Crime Scenes to Boardrooms
DDL’s methods aren’t theoretical, they are battle-tested in criminal investigations. FSLA has helped solve cold cases, expose fraudulent insurance claims, and challenge unreliable testimonies. The crossover into finance is natural: both domains hinge on credibility, motive, and truth.
In one case, DDL’s analysis of a corporate whistleblower’s statement revealed inconsistencies that aligned with internal audit findings, validating the whistleblower’s claims and prompting regulatory scrutiny. This fusion of linguistic insight and forensic rigour offers a new dimension to financial due diligence.
Due Diligence Deceptions
For asset managers; FSLA is more than a novelty, it’s a risk management tool. By integrating linguistic analysis into the investment process, managers can flag companies whose communications exhibit deceptive patterns. This doesn’t replace traditional analysis; it enhances it.
Imagine a fund selector reviewing two similar companies. One uses clear, direct language in its disclosures; the other relies on jargon, ambiguity, and passive constructions. FSLA provides a quantifiable edge, helping selectors avoid “blow-up” stocks that derail portfolio performance.
Empowering Advisers and Wealth Managers
For wealth managers and financial advisers, FSLA offers a way to protect clients from hidden risks. Advisers often rely on fund factsheets, manager commentaries, and corporate updates. By applying linguistic scrutiny, they can detect when a fund manager is hedging, when a company is spinning, and when a narrative doesn’t align with reality.
This is especially valuable in an era of regulatory ambiguity, financial complexity and client scepticism. Advisers who embrace FSLA position themselves as truth-seekers, professionals who go beyond the surface to safeguard client interests.
The Future of Fund Research
10 years ago my book New Fund Order challenged the orthodoxy of fund selection, urging fund selectors and advisers to think critically, question narratives, and embrace innovation. FSLA embodies that ethos. It’s disruptive, data-driven, and deeply human, rooted in the understanding that language reveals intent.
As DDL continues to expand its footprint, offering training and bespoke analysis to asset managers and advisers, the industry faces a choice: cling to outdated models or embrace a new paradigm where words matter as much as numbers.
In the end, the truth isn’t just out there, it’s in the discourse.
For more information go to: www.ddlltd.com #newfundorder
About JB Beckett
Across 30 years, JB Beckett has delved through the contentious and taboo of our industry, speaking around the world. In 2015 JB wrote “New Fund Order” and “NFO 2.0” in 2016 and co-wrote a number of books on digitalisation of asset management. Since 2020 JB has hosted the New Fund Order podcast – NewFundOrder.Buzzsprout.com. A multi-asset allocator for over 20 years, until 2018 JB was a fund gatekeeper at Lloyds and Scottish Widows. Today, JB is a member of Royal London’s Investment Advisory Committee and remains Emeritus of the Association of Professional Fund Investors and external specialist for the CISI.
