The battleground for winning and retaining clients is growing more competitive by the day. No longer just a sales issue – this is affecting how asset managers structure their business models.
Generally speaking, asset managers tend to differentiate based on their performance, product cost or client service. While many managers strive for outperformance over the long term, performance alone cannot be enough to build a client strategy on. With the move towards low-cost, passive and index products, there is also a limit to how low firms can realistically price their products.
Competing for clients
This leaves client service as an area where businesses can still differentiate, by creating a superior client experience that extends beyond performance or fees (1). One of the key strategies in this regard has been an attempt from asset managers to get closer to their end clients.
Some firms are starting to take more responsibility for the client relationship themselves, as opposed to relying on intermediaries to represent their products. Asset managers do this by way of vertical integration – a growing trend that has seen fund providers buy and merge with advice businesses (2). This way, the asset manager can take greater control of the experience their clients have with their brand.
For those that get it right, such a move enables managers to access more data about their clients. Ultimately, it gives them a better chance of delivering the more personalised, client-centric service that clients have come to expect from service providers.
Fundamental operational shift
For many asset managers, this represents a fundamental shift in the way they work – with major implications for their middle and back-office systems. Operating across a diverse range of clients, jurisdictions and asset classes requires a nimble approach, flexibility and efficiency in reporting and processing data at all levels. Individual investors are used to being able to access their finances at the touch of a button or tap of a screen – and asset managers’ systems need to reflect this new reality.
According to an Accenture survey on the future of asset management, 85% of businesses believed that asset managers have to radically restructure and redefine their investment operations to focus more on competitive differentiators (3).
In their focus on improving the client experience, asset managers are likely to face numerous challenges. It will require firms to be far nimbler in future. As new technologies emerge, they will have to be prepared to embrace them to stay ahead of the game.
For example, new distribution channels could emerge that would require asset managers to restructure or repackage strategies, or launch new ones in a relatively short amount of time. A flexible and adaptable solution, that can potentially be split into various components – such as that provided by microservices architecture – would be crucial to this.
Equally, new information sources will spring up that will inform investment decision making. This is already evident in the sustainability space, where new metrics on environmental and social considerations are being developed at a rapid pace. With standardisation of these sources still some way off, adaptability and corporate agility will be vital.
While there is unlikely to be one solution for the myriad problems asset managers face, having a scalable, adaptable technology platform as the foundation on which to build your business is a crucial factor for success.
Sources
(1) https://web-assets.bcg.com/img-src/BCG-Global-Asset-Management-2020-May-2020-r_tcm9-247209.pdf
(2) https://www.ftadviser.com/your-industry/2020/07/10/vertical-integration-trend-will-continue-apace/
(3) https://www.accenture.com/_acnmedia/PDF-154/Accenture-Future-of-Asset-Management.pdf
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