The new rules of client engagement

As the coronavirus pandemic reshapes our working lives, asset managers must find new ways to interact with their clients, says Apiramy Jeyarajah.

3 minute read

The new rules of client engagement

The coronavirus pandemic may have changed the world, but it has changed it in recognisable ways. In many cases, the crisis has simply accelerated existing trends. We were already doing more of our shopping online before lockdown conditions boosted e-commerce. Streaming services such as Netflix and Amazon’s Prime Video were growing in popularity long before cinemas were forced to close their doors.

The same is true when it comes to the use of technology in asset management. Even before the ‘new normal’ of Skype calls and Zoom meetings, leading firms were developing interactive online platforms to communicate more efficiently with their clients. COVID-19 has injected fresh urgency into these digitisation efforts.

The industry needs more than slick technology if it is to fully modernise its approach to client engagement

But the industry needs more than slick technology if it is to fully modernise its approach to client engagement in the wake of the pandemic. To understand why, we need to look at how clients’ expectations have shifted over recent years.

Historically, asset managers focused on building and pushing products rather than serving customers’. They relied on above-benchmark investment performance and star fund managers to lure clients and keep them happy. But a series of developments shook up the industry and forced asset managers to attend more closely to clients’ needs. First came the global financial crisis of 2007-’09, which eroded trust and opened the door for disruptive fintech companies that offered cheap and user-friendly robo-investment platforms. Traditional asset managers were left looking flat-footed and unresponsive.

Post-crisis regulation further changed the landscape. New rules affected the products and services asset managers could offer, while the Retail Distribution Review (RDR), implemented in 2012, increased the cost of doing business for financial advisers, leading to a wave of consolidation across the industry. One consequence of this trend was the creation of larger, more powerful advisory firms that wielded greater clout and could demand more-tailored services from their asset managers to improve the experience for end investors.

Clients now expect a higher standard of engagement from asset managers along with a better digital offering from all companies

At the same time, wider society was undergoing a digital revolution. New apps and online services revolutionised every aspect of our everyday lives, from listening to music to ordering a taxi. Having grown used to the convenience, personalisation and control offered by these new tech platforms, clients rightly began to expect a higher standard of engagement from asset managers along with a better digital offering from all companies.

The coronavirus lockdown and subsequent economic fallout have tested asset managers’ ability to satisfy clients’ demands for intuitive technology and responsive, customised services. Amid the market uncertainty, investors are seeking real-time updates on the performance of their portfolios, as well as tailored communications that provide insights on the wider economic and policy backdrop, ideally via bespoke digital platforms that can be accessed at home or on the move.

Asset managers must ensure they modernise the message along with the medium. At a time when video calls have become the norm, financial professionals have been granted a window into clients’ home lives, with their children, pets and domestic chores. This presents client relations teams with the opportunity to establish the kind of close relationship that might have taken 10-15 years to develop before coronavirus hit, but only if they are willing to personalise their approach. At a time when we are all facing difficulties of various kinds, empathy and understanding are essential. Now more than ever, clients want to build a partnership based on trust and credibility, not a tone-deaf product push.

Emotional intelligence – along with strong interpersonal and communication skills – is becoming increasingly important for those involved in the sales process.

In order to facilitate this kind of partnership, asset managers need to get to know clients and their requirements, in order to offer a customised service that enables them to achieve their desired outcomes.

This means sharing relevant information, not bombarding them with off-topic messages. It means responding rapidly to requests about investment performance or market conditions such as volatility or liquidity. It also means being willing to engage in informed discussions about how diversified portfolios are constructed, and how environmental, social and governance (ESG) factors are integrated into the investment process. Bespoke digital tools are a crucial part of the modern client experience, but a human touch is just as important in guiding clients through the process.

Asset managers will need to ensure technological solutions are backed up by a client-centric culture that pervades the whole organisation

At a deeper level, asset managers will need to ensure technological solutions are backed up by a client-centric culture that pervades the whole organisation. Part of this will involve building teams that better reflect modern society. Asset management in the UK remains predominantly white and male, lacking diversity of ethnicity, gender and thought. This is likely to hamper efforts to engage with clients who hail from a wider range of backgrounds.

The coronavirus continues to bring daunting challenges. But asset managers that move with the times should be able to find opportunities, identify new clients and refresh long-standing relationships. For those that don’t, the impact of COVID-19 will come as a long-overdue wake-up call.

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