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Client experience has become THE differentiator
Market forces have eliminated other sources of differentiation
In key market sectors, it is increasingly hard for asset managers to stand out from the crowd. Markets for mainstream active and passive investing are over-supplied with products. This has commoditised important asset classes and turned asset managers into price-takers.
If product performance and pricing have ceased to be reliable differentiators, unless a firm has a well-known brand, Client Experience (CX) becomes the differentiating factor in both attracting and retaining clients’ confidence.
CX is about commercial advantage
CX is the combined effect on a client of every ‘touch point’ along its journey through a firm and, of course, providing an excellent CX is essential. A favourable experience promotes broader and longer client relationships, which, in turn, protects revenue and increases the chance of a client endorsing firms to others.
It is also an area of focus of investment within many organisations. For example, despite fee and margin pressures, investment in CX appears widespread across the industry, with almost every manager we speak to suggesting that at least one CX project is on its agenda.
However, despite these initiatives being undertaken, CX has long been a difficult ‘puzzle to solve’, and the conversations we have many organizations and other interested parties suggests that as an industry, many firms are not getting it right.
Command of the latest data gives Accomplish its edge
Accomplish conducts primary research around the most prominent issues asset managers face, to help firms understand them and form their responses. In the second quarter of 2019, we conducted an industry-wide client experience research project covering a cross-section of professionals from the world’s largest asset managers to boutique active managers and hedge funds, collectively managing over €5.1 trillion of European client assets.
Our recently published report entitled “Client Experience has become the differentiator” highlights some of the key challenges and, vitally, gives a guide for firms as to how to overcome them efficiently and cost-effectively.
Our report found that delivering CX is problematic for many organizations. However, while challenges exist, there are significant opportunities to seized. In summary, our research discovered:
1. CX will impact your profitability twice
Over 90% of participants agreed a favourable CX keeps clients satisfied and onboard, protecting their revenue. Unfavourable CX, however, can cause client departures, which decreases revenue.
Turning to costs, complexity is a major driver, so minimising it through a deliberate CX will defend your net profits.
2. A lack of CX strategy and CX governance is causing problems
Across the industry, firms are experiencing twice as many indicators of an unfavourable CX than of a favourable one. This indicates a CX issue.
Those surveyed, cited the reasons as being common issues relating to RFPs, onboarding, contracting, reporting and billing. But these activities span the client journey, which implies a deeper root cause(s).
On further investigation, our data implies that the root cause lies not in these activities. The root cause is that ~75% of firms lack a CX strategy and sufficient CX governance to control the operational complexity of serving clients with different needs.
Seize the opportunity to adapt
Market forces have eliminated other sources of differentiation. However, importantly, while our research pinpoints that firms face many obstacles firms facing in delivering a favourable CX, the situation is controllable.
In fact, for organizations who move first, it presents an opportunity for those asset managers to gain a competitive advantage over their peers.
To analyse the problems in detail and develop a solution, Accomplish and several dozen asset management firms ran an industry-wide R&D initiative. The result was the Client Behavior Benchmark.
Adam Grainger
Behavioral analytics | Business intelligence | Asset management