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Special Report

Impact investing


Top 400 Asset Managers: The client is (becoming) king

Jackie Alvarez argues that more efficient use of technology can help asset management firms as they seek to better serve clients


Over the past 15 years, investment firms have been investing heavily in infrastructure and platforms to support investment activity. However, firms are now having to extend this work to provide better support for the acquisition and retention of clients.

This shift in focus is driven by fiercer competition for finite assets and clients across an increasingly crowded marketplace. To succeed, good performance will no longer be sufficient – firms will also have to build a more thorough understanding of their clients’ personalised needs, anticipate those needs and respond to market trends faster.

Outside the investment management industry, there are plenty of high-profile examples of brands using innovative approaches to provide excellent client service in the knowledge that this will increase consumer loyalty and sales. Jeff Bazos, the founder and CEO of Amazon, is quoted as saying: “We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.”

Unsurprisingly, Amazon, which is famous for its client-focused strategy, was repeatedly named by interviewees from investment management firms in our research as the firm they would most like to emulate. Our Client-Centricity report (March 2013) is a continuation of our quarterly research that looks in detail at how firms are organising themselves to support clients more effectively and proactively.



Client experience is important
Investment management is not unlike any other industry that wants to create and sell suitable products to answer client needs. As with the big retail consumer brands, we found that firms recognise the importance of linking client management, marketing, data intelligence and technology to create consistent external branding and client service across different products. This means moving beyond best-practice client service, as client service on its own is no longer sufficient to retain clients.

The top drivers for this shift in focus, as reported by investment management firms, are:
• (90% agreement): Ensuring service delivery is aligned to client-need to increase loyalty and repeat business;
• (60% agreement): Acquiring competitive edge by excelling at core strength to attract new sales; and
• (60% agreement): Building a consistent client experience and corporate message.
These top three drivers all reveal a focus on increasing revenue by keeping the client happy and engaged rather than using the ‘build and they shall come’ approach of previous years. The challenge is to meet the growing expectations of clients who now expect a smarter, joined-up experience across multiple channels (email, phone, intranets, collateral and so on).

Client ‘centricity’ isn’t a fad
Research we have been conducting in this area since 2004 shows increased realisation that ‘customer is king’, on an upward trend that can be charted alongside market movements. The trend started in the three successive years of falling equity markets from 1999 to 2002, when many firms saw for the first time the lack of connection between the factors that determine revenue and those controlling cost. Client management, which is usually categorised as a cost centre, became more standardised as a result. Meanwhile, clients saw the value of their assets drop and good relative performance in falling markets was not going to be enough to keep them happy. Service levels were upgraded to offset poor performance, pushing up the cost of client management further.

During the global financial crisis, when bad financial practices were laid bare, client servicing, in particular reporting and detailed meetings, increased significantly as it was necessary to improve investor confidence. Today, 50% of investment firms cite the regulations resulting from that period as a significant driver to improve their client management practices.

The journey to maturity is ongoing
As the investment industry has grown, investment management firms have become more complex with fragmented teams addressing performance measurement, compliance, operational risk, and so on. Client management has often become a separate function, with poor connections to business development, product design, operations and reporting.
This often occurred over a long period in an unstructured way and so there was a lack of guiding strategy. Today, there is wide agreement that client management programmes, which link activity together across the organisation, offer huge scope for improvement. Some 70% of firms will be actively developing their programmes this year to address a range of challenges.

Given that firms recognise the importance of good client servicing, it is surprising that 66% of respondents agreed that changing the company culture from being product to client focused was the biggest and most persistent challenge in achieving their client management strategy.

The main difference between a product-centric and a client-centric strategy is intent – the product-centric organisation is driven by building products and services that make the firm money and then finding clients who are willing to pay for them. The client-centric strategy looks at the firm from the perspective of the client; if I were the client, what would I want?

Additionally, client reporting and responding to client requests for information is another area where investment managers must concentrate. Customised client reporting presents a problem across the industry, exacerbated by clients’ growing thirst for data in a format that fits in with their own internal reporting requirements.

All of the firms in the research intervene manually in client reports for at least 10% of clients, and 29% of the firms customise reports for more than 75% of their clients. This is a big challenge, especially as firms are looking to bring on new clients, which will compound the demands on client servicing teams.

Worse still, 60% of firms are not completely satisfied that they actually have all the data requested by clients, and 66% are not satisfied that they can deliver client information via digital methods. Consequently, expensive client servicing staff get tied up in routine work collecting and delivering data rather than on activities that add true value to the client or product.

Client management teams are looking to technology to integrate information and provide flexibility
The result of this is a trend to implement technology solutions that are integrated with existing systems (such as integrating client-reporting systems with CRM or email systems) to deliver information to clients in a more streamlined and automated way; a more personalised service with less fuss.

This ‘efficient personalisation’ will take investment; the majority of firms are expecting client servicing costs to increase in 2013; 50% of firms expect this to increase by 1- 5% and 20% expect costs to rise by more than 5%.

However, the improvements and greater capability brought by investment in technology will be beneficial considering its effect on client retention; 62% of institutional clients will give investment managers with excellent client service at least six months extra to turn things around during times of poor performance.

However, technology is only part of the answer. It is essential to build a client-servicing function that is integrated, equipped and supported by the whole business in order to provide a better service to clients.

Jackie Alvarez is a principal at Investit


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