Building successful client relationships
Client relationship management is one of those management mantras that everyone agrees is a "good thing", but is hard to get right in practice. Even firms who employ dedicated relationship managers sometimes can't decide precisely what their role should be across client service, reporting, advisory and sales functions.
The investment management community has been relatively slow to adopt best practice techniques that have helped suppliers and buyers work together in other industries. Indeed, not everyone thinks that these techniques are relevant.
Investment managers are appointed to deliver investment performance within guidelines set by the trustees. Performance is discussed at trustee meetings, and performance determines the strength of the relationship. Everything else is secondary. Between trustee meetings the main focus is on relationship maintenance: providing a satisfactory level of administration and service, sending out timely and accurate reports, communicating good news, and managing
However, with the increasing pressures facing pension funds there is a widespread acceptance that relationship maintenance is not enough. Investment managers need to pay more attention to how they support clients at all levels, or they will lose business.
They need to invest resources in the right people and the right skills, so that they can be more proactive with clients and advisers. It is not enough to react to problems or opportunities as they arise.
They need to think strategically about their client's business, and take appropriate action before problems spin of control or opportunities are lost.
They need to build stronger relationships with their clients independently of third-party advisers, by looking beyond investment performance and asking clients: "How do we add value to your success? How do you perceive the benefits of staying with us, versus the costs and risks of moving to another investment manager?"
To do this, firms have appointed dedicated relationship managers and teams, introduced new account management tools and service agreements and sent their client-facing staff on technical, sales and relationship management training courses.
How has this impacted the client-side? Are relationship managers using more proactive and tailored approaches to discussing business needs, goals and constraints?
If they are, hopefully they can be given the time they need to perform this role successfully between trustee meetings, because there should be a "win-win" for all parties.
In particular, there are some real benefits for pension fund trustees and staff. A more open dialogue should lead to fewer nasty surprises for trustees.
Fewer problems or issues will be swept under the carpet - an understandable fear for trustees who worry that their investment managers keep quiet for as long as possible if they have performance, personnel or administration problems. If a relationship manager has a deeper understanding of the requirements they can help get the service and support really needed.
For example, the opportunity to learn more about new investment ideas, risk management approaches or regulatory changes. Greater access to technical specialists in different parts of the investment manager. Better ways of measuring and improving the quality/costs of administration, service and reporting. Training relevant to an organisation's needs, and so on.
How can you tell whether the person handling an account is good enough to deliver these benefits? It's important to know, because bad relationship managers can waste time. They lack technical knowledge, but won't involve others.They talk too much and don't listen. They don't follow through. We've all met people like this. So let's focus on positive traits, the behaviour of ‘world-class' relationship managers.
The five traits listed below have come from 15 years' experience of working with relationship managers on both sides of the buyer-supplier fence, across many industries. It shows the type of behaviour that pension funds and their advisers should expect, indeed demand, from the relationship managers they are allocated.
It is possible to score these traits for the relationship manager(s) and decide how highly one should rate their approach.
In the space available it's not possible to elaborate on each of these traits, or the technical and inter-personal/leadership skills that relationship managers need. Suffice it to say, not every relationship manager finds it easy to deliver results - or apply the techniques they learn on training courses.
What can be done if a relationship manager is not rated very highly? There are three options: ignore them; ask for a different manager; or help them. The first two options are not optimal, so it may be worth trying to influence the way the relationship manager operates.
After all, a good relationship manager will try to influence people's thinking and actions. Based on the five traits introduced above, here are some practical and constructive actions that can be taken.
First of all, the relationship manager can be helped to ask the right questions. Discussions don't need to be guessing games. If they are not covering the right topics or drilling down into the details, say so. It generally pays to be direct and talk about the real future issues, risks and opportunities.
This doesn't mean becoming locked into a relationship, or exposing a lack of knowledge.
It just means setting out everything on the table that is relevant, and in return expecting the relationship manager to help address the key issues and involve the right people.
Second, cross-check that the relationship manager really does understand the business, what is required and what would be a successful outcome of working together.
Get involved in helping them fill out the right ‘account profile' and analysis of your business. It is vital that they are able to articulate the business in an accurate way to other people - whether talking about technical details or the "big picture".
Third, help them to keep focused on what really matters. The failure to set clear priorities is a common problem with relationship managers, especially if they handle many different accounts. They tend to solve problems in the order they arise, instead of sitting back and prioritising actions.
One way of encouraging them to be more focused is to ask them to record the top three priorities agreed, and document their action plans for delivering results.
Fourth, they can be helped to win the support they need to make things happen across their own organisation.
For instance, help from senior people within the organisation might be useful. Not all relationship managers have a great deal of power internally, compared with (say) portfolio managers or heads of administration.
ot all relationship managers are good at driving through necessary actions or changes, and they may welcome assistance in this area.
Finally, it is possible to instil discipline by asking them to give a clear, practical template for future meetings. Ask them when they would like to meet during the next 12 months. What is the objective for each meeting? Who else should be involved? How will they know each meeting is a success? By doing this one can plan ahead, with fewer surprises, and involve other people at appropriate times.
Managing your relationship manager in these ways shouldn't take up too much time. You will get a lot more value from the relationship managers you are given.
Ultimately, they will be better informed and equipped with the knowledge you need to make the right decisions for the pension fund.
Simon Murray is a partner of sjmurray ACCOUNT-DIRECTOR LLP. firstname.lastname@example.org