“Client services could be a key focal point going forward for how fund managers might stand out from the crowd and remain relevant,” says Ross Ellis (pictured), Vice President and Managing Director of the Knowledge Partnership in the Investment Manager Services division at SEI, when discussing the third of five trends in SEI’s latest white paper, Evolution in Asset Management.

The ripple effects of the global financial crash are still being felt by investors, as they seek to better understand the risks in their institutional portfolios.

This has prompted an increasing desire for simpler, smarter reporting from managers, and better lines of communication; especially as their portfolios become more complex. Investment managers can ill afford to scoff at the investor who wants a customised approach, particularly with respect to alternative funds. More and more, this is becoming a de facto choice among larger pensions and endowments.

How managers choose to respond to the ‘emboldened investor’ will vary, of course, and be influenced by various factors, one of which will be technology capabilities. As SEI points out in the paper, the transformative potential of new technology has awakened many, opening another front in the battle for client loyalty and satisfaction alongside performance and price.

SEI argues that the ability to create a unique experience for every investor would be a potent differentiator for fund managers, as they look for ways to satisfy investors, and refers to a 2018 paper it wrote - Digitizing the Investor Experience - in which it wrote that executives see “a direct correlation between digitization of customer experience and the bottom line,” with firms identifying themselves as leaders in digital transformation expecting much stronger growth than their peers.

Making a commitment to client service, with the use of technology platforms and tools, cannot be underestimated when the world in which we live is about to be transformed by the 5G revolution, where data transfer and processing capabilities will be at a scale never before seen. The big technology platforms led by Amazon and Facebook are ideally placed, with their abundance of user data, to develop highly targeted, customised wealth products for retail investors, should they wish to.

To that end, fund managers cannot overlook the client experience we all enjoy in this interconnected world.

“Of course, the number one item any investor is looking for is performance,” says Ellis. “That’s the reason why they invest in the first place. Active managers are paid to outperform the market but beyond that, they are asking what else can they do to attract and retain investors. If you look at Amazon, they have retail transparency, they have a huge focus on customer care, and that influences each and every one of us in our daily lives.

“It’s becoming very personalised and it has changed the expectations of retail consumers.

“If I’m investing in a fund, I’m no longer satisfied waiting a month to understand what’s in my portfolio and seeing various attribution characteristics. I also want to know what fund products other investors like me are buying, to introduce some degree of predictability to the client experience.”

As opposed to just getting performance numbers on a particular fund’s top ten holdings, imagine if one had a technology-enabled client service representative able to understand not just the fund an investor has allocated to, but the allocation profile for their entire portfolio – including funds run by other investment managers.

Ellis thinks that would bring a much more “consultant-type experience” and would help fund managers to retain investors, which is far more cost-effective than having to go out and find new investors.    

“Not only is it in the best interests of investment management firms to retain investors, it also provides an opportunity to up-sell or cross-sell and potentially attract more capital from those existing investors when a new fund product is launched. It is about finding ways to add value so that investors want to stay with the manager, beyond merely performance, which we all know is variable,” he says.

SEI proffers three pieces of advice for how investment managers could improve the client experience.

  1. Listen to clients. This is easier said than done for firms more accustomed to communicating “to” investors rather than “with” them. Whether it is done systematically or opportunistically, establishing a true dialogue should ultimately produce more satisfied clients, better long-term retention and a more attractive proposition for potential new clients.
  2. Deliver data effectively. Legacy systems can make it difficult to provide clients with the data they need, particularly if it is anything out of the ordinary. Processes may need to be redesigned.
  3. Aim for real-time, customisable, client-driven reporting capabilities. Even if clients are not yet demanding these things, their expectations are shaped by seamless, cloud-based apps in other parts of their lives, and they will inevitably expect them from you, too.

Investors tend to be influenced by the experiences they have everywhere else. Whether it is in areas outside of the financial services industry, or whether it’s based on receiving a certain set of reports and level of transparency from X fund manager but not from Y fund manager, they want to enjoy a similar, consistent experience; one that satisfies their expectations.

“If you’re invested in a hedge fund as well as a private equity and a private debt fund,” says Ellis, “by default they will have different levels of transparency, but investors will still compare one fund’s reporting against the other and say, ‘Well, I like what I’m receiving from this manager so I’m going to ask for the same from the other managers in my portfolio so that I can more easily aggregate my investments’.”

In some respects, dealing with the changing face of investor expectations is a bit like Newton’s Cradle.

First, there’s a push from one side, where investors say they want certain things from their manager, the manager takes the appropriate action but by the time they’ve done so, the market will have likely changed. Investor expectations change. And managers face a new push from the opposite side.

“It’s hard to play catch-up all the time,” acknowledges Ellis. “However, I believe the more sophisticated, leading edge managers who survive over the long term will be those who are proactive rather than just waiting for investors to ask them to do something. They’re going to provide different levels of transparency and consulting that will put them ahead and differentiate them in the marketplace.

“The goal is to make every conversation, every experience, additive. By working with a manager in a way that leaves the investor enriched…that will likely pay dividends in the future.”

Read more about the impact of transformational technologies in chapter 3 of SEI’s white paper, Evolution in Asset Management. Select preferred format: US/UK

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