How to create real customer relationships in the digital age

Headlines

• • Progress in digitalisation differs between asset managers in the retail and institutional space. The value for retail customers is stronger, but the ROI is questionable.
  • There is responsibility on the asset management industry to show intermediaries the value of digitalisation, in terms of profitability but also relationship building.
  • Financial services companies spend so much time incentivising clients to go online, however the best success comes from simply providing clients with a code and effectively communicating with them exactly what to do and how to do it.

   

  Key themes

  In the retail space, there is a massive opportunity to digitalise the investment journey, particularly when it comes to retaining clients. With the advice gap growing, easy access solutions are growing in importance and delegates agreed that whoever can get their clients on a sustainable digital journey will be the long-term industry winners. However, institutional asset managers are much less incentivised to make the change as the incremental cost saving in the short term is less profound.

  This is an important distinction, as ultimately the larger share of income for asset managers comes from the institutions. Looking at the challenges faced by the likes of Nutmeg, part of the issue is that, while the platform is popular with individual investors, each client brings no more than £12K to the table. Given the massive overheads required to effectively digitise, the value this brings is not always substantial enough to sway management teams to change tack. As there is not a guaranteed ROI, digitalisation is not sitting high enough on the agenda.

  InvestCloud believes digitalisation will become a more prominent topic for institutional managers as we move away from defined benefit. Delegates in this space reported that their largest issue is getting the institutions and intermediaries themselves online. The industry is ultimately still a “people business” and advisers report that when they don’t get as much facetime from their clients it makes it harder to understand and empathise with investment goals, as well as demonstrate their value for money. Yet some advisers are tackling this through secure digital messaging and other solutions.

  Delegates agreed that there is responsibility on the asset management industry to show intermediaries the value of digitalisation, in terms of profitability but also relationship building. Fund selectors are telling us that they want faster and simpler access to information, and so asset managers should consider how they can use digital to convert this and show selectors that they are listening to their needs.

  When it comes to converting a paper client to a digital one, InvestCloud’s advice is: just tell them. Financial services companies spend so much time incentivising clients to go online, however the best success comes from simply providing clients with a code and effectively communicating with them exactly what to do and how to do it. Furthermore, asset managers should use big data to look at their customer journeys and break down their findings by different customer groups. What prompts might each group respond to, and when?

  So, what can asset managers do better? Delegates agreed that as organisations, they were not taking a long enough view – thinking about the benefits of digitalisation over five years, not 20, and this was why digital solutions were not getting the investment needed. Experts from InvestCloud added that when starting on the digitalisation journey, it’s important to address the cultural shift needed and not to let perfection be the enemy of good. Organisations need to stress that it’s okay to get it wrong and implement a test and learn approach. Too many organisations becoming paralysed in the decision stage, wasting millions by leaving their digital solutions sat in development, as opposed to getting them live and addressing issues as they come.

   

  Conclusions

   

  • The biggest challenge when it comes to digitalisation in asset management is getting intermediaries and advisors to also move online. To combat this, asset managers need to better communicate the benefit to their clients in term of efficiency and access to better resources.
  • Many asset managers are put off by digital risk, as there are too many reasons why they shouldn’t invest in the infrastructure systems to fully digitise their businesses. Not enough companies are thinking far enough ahead to foresee the risk of NOT digitising.
  • Asset Managers need to shift their culture to not let perfection be the enemy of good. Digitalisation requires a ‘test and learn’ approach.