Can large asset managers provide superb customer experience?

by Bruce Kasanoff on September 14, 2011

Customer experience management is changing the standards of excellence in dozens of industries, and today let’s focus on one of the toughest industries of all: global asset managers, the firms that manage billions or trillions of dollars. Just to be specific, this post focuses on the largest players in this industry, those who sell a full range of products to a wide span of clients.

To be fair, large asset managers are bound by regulations, internal restrictions and security concerns far beyond those of other industries. Complicating the matter, their clients span a broad range from institutional investors – which can include corporations, government institutions, pension plans, and endowments – to high net worth individuals and the general public.

What these firms call “marketing” is a different animal than what most industries practice. To promote their products, they aren’t inventing Nike swooshes or timing tennis serves like IBM does at the US Open. For an asset manager, sophisticated marketing is more like disciplined use of CRM software, consistent look and feel of corporate materials, and a professional sales force.

Disciplined asset managers meet disruptive forces

Despite the above, the disruptive forces changing other industries are going to change the asset management industry, too. Client expectations are going to change because the way they access information, communicate, organize their thoughts and make decisions are all changing.

So here are some very basic ways asset managers can react, right now:

1.) Segment clients by needs

To generalize a bit, the largest asset managers still tend to segment their efforts by the products they sell, rather than the clients they serve. Or, even worse, they organize their sales forces by geography.

The result always – always – shortchanges clients. Instead of getting access to the best talent and most relevant information, clients get access to the person who fought hardest for the account, or the product the asset manager is most eager to sell.

A better alternative is to segment clients by needs, which then makes it far easier to deliver information and services that are tailored to client needs. How do client needs differ? Well, imagine that one client is a government agency in the State of Missouri, and another is the endowment of Harvard University. The level of sophistication of each group, their practices and restrictions, their investment goals, and their cultures are dramatically different.

Many asset managers segment in a crude manner. For example, they group all endowments and pensions together. This is a start, but not enough.

The lesson from other industries is clear: the deeper you take segments, the more responsive you can be to client needs. So, for example, you could make endowments a segment, but then divide that segment again. All endowments are not alike. Figure out the critical differences.

2.) Create modular capabilities, to better meet the needs of each segment

Segmenting is worthless if you can’t treat different segments differently. So firms need modular, mix-and-match capabilities that client service teams and portfolio managers can utilize to serve their clients. Such tools ought to span product offerings, reporting options, decision-making tools, and educational/outreach efforts – just to name a few.

The more flexible such capabilities, the more responsive an asset manager can be to its clients.

I suspect that most asset managers remain fairly inflexible. They aren’t even able to generate sophisticated reports that “slice and dice” accounts across product lines or sales groups. Yes, some of these limitations might be due to regulations or restrictions, but most are due to the same inertia and silos that plague other industries.

3. Anticipate client – and segment – needs

One of the largest benefits of segmenting your clients is that doing so allows your firm to anticipate what clients will need. If you place your most aggressive large institutional investors together under one group, that group will have the time and resources to master all of your firm’s best offerings for clients like these. It will be able to describe in great detail services and reporting options that may be missing. so your product development teams will be able to fill the gaps. It will see changes coming before most of your competitors do.

At Smart Customers – Stupid Companies, we see industry after industry fall behind their customers. This is because smartphones, innovative apps, and wireless access to information are all giving customers unprecedented flexibility and knowledge – while many companies still struggle with their own silos and outdated databases.

Some lessons will come not from the segments themselves, but from other industries. Will the asset management industry be selling iPad games? No. But will it be forced to deliver iPad apps? Yes.

4.) Reward employees for delivering what clients need

The reward systems at most asset management firms are badly out of skew. Professionals get paid for protecting their turf, pushing certain products, and appearing smart. These practices prevent firms from segmenting clients properly, delivering them options that best suit their needs, and maintaining a comprehensive perspective across all of the client’s activities.

If you don’t pay an employee to be a team player, he won’t be a team player. If you don’t pay groups to work together, they won’t work together.

Large asset managers are wrong-headedly looking at each other as competitive threats. Disruptive change doesn’t come from the center of an industry – where the dominant players live – it comes from the edges. Much of the asset management industry has been commoditized. Few, if any, managers can maintain a consistent performance level that exceeds market averages. There are thousands of choices in each category, mostly indistinguishable.

The industry ought to be motivated by the threat of completely innovative new competitors. Ask yourself: if I was a well-funded maverick who wanted to completely shift the balance of power in this industry, what would I do? How could such a player design a process that is 100% built around the best interests of sophisticated clients? How would I compensate people to serve clients, not just push products?

(Want a glimpse of a possible scenario? Check out yesterday’s post on BankSimple, which is designing a better interface than any bank has been able to build, but is using actual banks to manage deposits. In other words, BankSimple will own the customer relationship, instead of the bank that holds the customer’s money.)

5.) Manage client touchpoints in a far more sensitive and sophisticated manner.

Touchpoints are all the places where your firm touches its clients: sales calls, performance reviews, actual reports, pitches, your web site, etc.

There are three basic types of touchpoints:

- Human: a portfolio manager or marketing professional, for example
- Dumb: a touchpoint that can’t change or respond, such as a printed report or presentation
- Smart: a touchpoint that the company or the client can use to share or get information, such as a reporting web site or app

The biggest shift in business today involves replacing dumb touchpoints with smart ones. The era of dumb is dead. Everything is turning smart, from your refrigerator to the way you serve clients who give you $10 billion to invest. Any other path is suicide.

In every single industry, companies are figuring out how to make their (broom/car engine/fire extinguisher/newspaper/pen/spray cleaner/_________) smart. The asset management industry is not immune to this trend. In fact, it offers products and services ideally suited to such a shift, because financial transactions and their associated data are already conducted through digital means.

The largest asset managers face the same disruptive forces impacting other industries, and these forces are shifting power and control towards clients. It’s time to rethink the way that these manager best serve their clients.

Bruce Kasanoff is a customer experience strategist and co-founder of Smart Customers – Stupid Companies.

{ 1 comment… read it below or add one }

Jeremy King June 25, 2011 at 5:00 pm

Great piece, Bruce. I often think the biggest challenge in asset management is implementing changes to the business model that are so seemingly obvious. Moving away from a focus on product towards clients requires a cultural change as much as it does new lines on an org chart and new sales plans etc. It is often even harder to shift an asset management firm’s culture when it is listed and is primarily focused on its shareholders. Firms also hate ‘big change projects’ so it makes real leadership essential in moving the dial!

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