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Creating a compelling client experience in an evolving digital world

Phil Lynch
Senior Go-To-Market Strategy Principal, SimCorp

Read the article to learn about:

  • How an evolving investor base and digital world is changing the face of client communications
  • The strong connection between client communications and client experience
  • Why digitalization holds the key to delivering a superior client experience
  • Transforming client communications from a cost center to a profit center

It is fair to say that asset and wealth managers have had a pretty rough ride in the last 24 months. There’s been intense competition led by industry-wide M&A, blending asset managers into a homogenous landscape difficult to carve a niche in. Then in 2020, a market event like no other, forcing firms to rethink operations across a remote workforce and face a more demanding investor base than ever before.

In this new operating environment, where investor confidence is rattled and client retention is less of a safe bet, there is one certainty: Digitalization of client communications holds the key to delivering a superior client experience. This will not only help firms stand out in today’s uniform market, but also deliver asset and wealth managers a competitive advantage. An advantage that marks the difference between staying afloat and thriving.

Empowering client communications in a crisis

We’ve seen over the past year that communication and engagement are essential in times of heightened volatility. What hit firms harder during the COVID-19 pandemic was not only the demand for custom and ad-hoc reporting, which hit new highs, but also a changing expectation towards communication.

Stemming from an evolving investor base, the buy side is seeing a generational shift that spans across high net worth individuals and institutional investors. This new generation is setting the bar far higher than the one before it. Today, client communications is no longer judged on portfolio performance alone, with mode and frequency of communication being equally important.

In an increasingly competitive and demanding market, firms need to deliver a diverse and detailed range of institutional mandate reporting and other client facing materials, far more regularly than traditional reporting frequencies. What’s more, with investors using on-demand technology in every aspect of their lives, asset and wealth managers cannot afford to be the exception any longer. Bringing communications and reporting into the digital age for a more compelling client experience is now a must.

We know that remote working is set to be the status quo for the foreseeable future and firms cannot shy away from the ‘anytime anywhere’ access to data their investors want today. Mckinsey & company recently noted that “nearly all organizations, whether traditional companies or start-ups, are reorienting their business models to be more digital” and that it is “highly likely that consumers will prefer to use many of these digital offerings after the crisis.”1

And there is value in doing so. Asset and wealth managers will be remembered by their actions both in and after this crisis. Providing more context and confidence, firms have a significant opportunity to adapt to a digital client communications platform and introduce the use of interactive tools and self-service portals, that will not only significantly reduce operational friction, but create a client experience that can differentiate them above their peers.

Overcoming operational hurdles through digital transformation

The rationale for digital evolution can be found in a recent survey conducted by Aite Group; Client communications: The stumbling block to next-gen client experience?, which found as many as 65% of the 23 global firms participating, admitted their current operations are struggling to keep up with investor needs for more frequent and granular data, available on-demand. Despite this, of the 23 participating global asset and wealth management firms, only 22% were actively reviewing their current client engagement model. These firms are investing in digital portals and interactive reporting tools to provide their investors enhanced engagement.

This leaves the vast majority of firms falling into a false economy when it comes to investor expectations for client communications. Failure to act now will only see asset and wealth managers falling into a critical investment gap that could hurt their future growth. The main findings of the Aite survey underline a lack of active client engagement, a reliance on the status quo and near-term cost concerns, as a threat to digital innovation in the industry. However, the arguments for harnessing a digital strategy, far outweigh these concerns and demonstrate just how vital it is to take action now.

Overhauling redundant processes and empowering a remote workforce

If we take a snapshot of the current market, inadequate client reporting has cultivated a lack of flexibility in asset and wealth managers being able to respond to rapid change. Much of this is caused by disparate and inconsistent data sources and a remote workforce that has made data-gathering a conundrum. The heavily manual nature of client reporting, together with high instances of data errors and reconciliation, has not only overwhelmed resources in the pandemic, but for some firms led to a compliance nightmare.

To date, firms have taken a short-term view throwing people at the problem to solve the issue, but in leaner times this is no longer a sustainable option. Firms now have an opportunity to take a proactive stance, using client experience as a way to create growth and build resilience. Core to addressing this operational challenge, is a digital platform that can deliver one single version of the truth. Together with intuitive workflows and open integration, a digital platform can offer consistent and transparent client communications. The goal is not to replace, but empower the workforce by solving redundant and ineffective processes and creating the scale and automation needed, to improve control and deliver a superior customer experience.

Digitalization is not a fad, and we know just how quickly the industry can go from staying on top to playing catch up. No firm can afford to be a laggard in this tough climate. This is less about fixing broken parts and more about staying one step ahead of a trend that is only going to get bigger. To adapt in this evolving market, firms need to adopt cloud-based technologies to create the agility needed in their communications, to retain satisfied clients and move quickly to capture new opportunities.

Meeting investor needs through consistent client engagement

In the Aite survey, despite participants noting that the number of RFP’s including questions on digital capabilities had increased, 38% identified cost and challenges in creating a business case ,as one of the top barriers to investment, while 69% claim their firms’ inactivity stems from a lack of explicit demand. What’s concerning about this perceived lack of demand is that only a quarter of firms (27%) actually carry out regular client surveys.

We have been on a journey for the last two years or so to re-imagine the client experience. Some of this is technology investment, some of this is getting the right people in place. However, it's important that any new development involves clients every step of the way. For example, we sought client feedback in beta testing of our digital portal and tried to put clients first in its development. Change is a slow process, but over time the idea is to allow clients to self-service.

Global Head of Reporting of a Tier-1 US based asset manager

This leaves three quarters of firms dangerously deducing the need for newer digital tools as unnecessary, purely based on the continuation of traditional PDF requests and on the low usage rates of current legacy tools. Of the firms that don’t carry out regular client engagement to get a finger on the pulse of their investors’ needs, the question remains can they afford to lose investors in the future, simply because they don’t have sufficient insight and understanding of them, to deliver a differentiated client experience?

Digitalization elevates client experience and the bottom line

One of the key barriers to investing in digital communications is the difficulty some firms have in linking client communications to revenue generation. In the Aite survey it was clear that this is mostly because many firms choose ‘efficiency metrics’ such as time taken to create content (83%) or low error rates (73%) to measure the function. However, very few firms judge the effectiveness and contribution of client reporting and communications to actual client retention (14%) and even less so for client wins (5%). This makes it far more difficult to understand the correlation between client communications and client experience. In stark contrast, of the firms actively investing in next generation portals and on-demand reporting, two thirds recognize competitive advantage and the ability to retain and attract new investors, as a key driver.

The price of not recognizing good client communications and client experience go hand in hand, is candidly captured in a 2019 Casey Quirk report, which found an overwhelming 76% of buyers reporting client experience as a contributing factor to ending an investment manager relationship2. Essentially, delivering trustworthy and timely insights is crucial in the eyes of the investor and can be the difference between a client lost and a client retained.

The survey suggests a divergence within the industry, not only on how to get to a digital future, but also when. Several front-running firms are acting now in the belief that interactive digital client reporting will be the benchmark, while on the other hand we also see asset managers that take a backseat face a potential stumbling block in improving client experience…With many investors being consumers of on-demand data…those asset managers waiting for investors to demand change or believing the demand will never materialize, are betting on a risky strategy indeed.​

Paul Sinthunont, Senior Analyst, Aite Group

Turning client communications from a cost center to a profit center

It’s clear that digitalization can play a key role in advancing asset and wealth management operations. Adopting a next-generation client communications platform that can deliver the resilience, scale and cost-effectiveness needed to uplift client experience and the bottom line, will be a significant game changer.

Going digital essentially creates a change to not only how, but what can be communicated. This can open up new modes of commentary, reporting and data analysis, helping firms in the race to truly differentiate and offer something new. It can also create advanced insights, through behavioral analytics, which can help firms understand their investors better and respond with customized offerings and cross-selling opportunities. By analyzing client engagement data in this way, firms can use the various touchpoints they have with their investors to not only understand but anticipate the implications of something the investor themselves may not even have yet considered.

Interestingly, this level of understanding not only creates client stickiness through differentiated experience, but also demonstrates a human element to an otherwise faceless business. We’ve seen just how important this is in the last year alone and going forward this is where firms can show empathy and demonstrate meeting their investors’ needs is a key priority for the business. This invaluable asset has the potential to create a paradigm shift, transforming client communications from a once necessary cost center, to a profit center that can retain satisfied clients and boost revenue.

While, reshaping client communications to provide a superior client journey is the goal, for many firms it is more a marathon than a race. The Aite survey suggests there is much work ahead for firms to deliver against investor expectations. The future of client communications doesn’t necessitate a re-write of the rulebook. It does however, require firms to acknowledge that the starting gun has been fired.

The natural path is a client communications function that can in the near-term, combine both digital and analogue tools. By complementing static and traditional methods of reporting, with a cutting-edge, digital suite of solutions, firms can meet the complete needs of an investor base that is far more transient than before. For those firms slow off the mark, catching up will prove not only detrimental to client retention, but ultimately to their survival.

To get in touch with the author see here.

1. Elevating customer experience excellence in the next normal, Mckinsey & Company (May 2020)
Distribution 2.0: How technology will redefine relationships with asset management clients, Casey Quirk (2019)

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