In brief
Macro trends and market forces mean that, for many asset managers, CX has become THE reliable differentiator.
This article, therefore, establishes the business case for CX in asset management and explains why overlooking CX is an unforced error.
Macro trend: over-supplied market
Global financial tides have risen in the last 30-40 years, generating significant wealth for individuals and institutions.
They needed help managing this money, and for much of this period, those who knew how to do this could command high fees, stimulating a phenomenal growth in the number of asset managers.
Every asset manager wants to manage a fund, so all this growth created a glut of investment products. For example, between 1997 and 2018, EFAMA calculated that the total number of funds quadrupled in Europe alone.
Business strategy: CX is THE reliable differentiator
If you oversupply a market with similar products, prices will fall. If you also introduce cheaper substitute products (e.g. passives and ETFs) that educate clients about their options, bargaining power will shift to clients. As a result, asset management executives now talk about the “survival-of-the-fittest market” characterised by the “commoditisation of investment performance” and “price pressure.”
During the same period, the interconnectedness of financial markets, facilitated by digitisation, became more pronounced. This led to greater and faster transparency that enabled a steady stream of financial scandals. These can arise unannounced creating a risk of contagion by association that has diminished the reliability of another strategic differentiator – your brand.
The combined impact of these macro trends and market forces on the asset management business strategy was that three out of four previously reliable sources of differentiation became less effective: product performance, price, and brand. The remaining differentiator is how you leave your client thinking, feeling, and acting. That’s client experience (CX), and because it is entirely under your control, it now remains THE reliable differentiator. The others still exist, they are just less reliable now than they were a few decades ago.
The business case for CX in asset management
Three main advantages create the business case for CX in asset management:
- CX is dollarizable and belongs at the heart of your commercial management – because CX is measurable through client behavior, you can set quantifiable and dollarizable targets. To explain, a client’s behaviour can be either a gift of time or a transfer of money. Gifts of time are leading indicators of the money transfers that may or may not follow, and these transfers will come from behaviors like buying (sales conversion), staying (client tenure), and buying more (products per client). Few things are more important than whether your clients buy, stay, and buy more, placing CX at the heart of your commercial management.
- CX is a solution to the root cause of the problem – as we have seen, product oversupply caused the current dynamics of the asset management market. A product-led response would exacerbate the problem. In contrast, CX rebalances an organization from being product-led to being client-led.
- The truth is that your firm delivers a CX everyday – you just may not know how it compares. If it underperforms at engaging clients, they may give their time to your competitors … and then their money. Therefore, if you do not rebalance your focus towards clients, you may be betting on sources of differentiation that have ceased to be reliable. It may work, but you would be taking an unnecessary risk.
Given these advantages, overlooking CX is not just a missed opportunity but an unforced error that could lead to negative consequences.
Cost / benefit analysis [2024 update]
Let’s now look at some of the most important actions you should take to adopt CX, the benefits you can expect from them, and the role the Client Behavior Benchmark fulfils.
| Action (the cost to you) | Benefit | Client Behavior Benchmark |
|---|---|---|
| 1. Identify and measure the ongoing performance of your crucial client touchpoints. | Enable executive oversight and incremental improvement. | Best practice – get your data in order with the Benchmark’s Helix© taxonomy of CX data. |
| 2. Institute a cross-functional CX capability. | A coherent, memorable, and unique sales funnel and client journey spanning marketing, sales, and service. | – Discover, in time and money, where your pre- and post-sale experiences out and under-perform. – Explore specialist insights, hypotheses, and recommended next steps. |
| 3. Set informed targets for the contribution of your sales funnel and client journey to your financial results. | – Keep your sales funnel as wide as possible for as long as possible. – Lengthen your client tenure and deepen your product-per-client ratio. | Quantify the impact of your CX’s out and under-performance on your revenue. |
Some may not adjust in time … avoid being one of them
To conclude, bargaining power has shifted to clients, your firm delivers a CX every day, and it is entirely under your control. Because of its commercial nature, overlooking CX in asset management is an unforced error.
We hope you found this article useful. If you want to act further, here are Accomplish’s 3 steps to CX excellence:
- Check the readiness of your CX data – learn how and download the check here.
- Book a demo to discuss your free trial in the Client Behavior Benchmark.
- Discover, in time and money, where your CX out and underperforms at engaging clients.
