Technology: a key tool in keeping clients happy

Intensifying market competition is increasing the pressure on asset managers to maintain high levels of service to high net worth clients. The benefits of using IT can be critical to success in this area, says Francesco Maffei The number of high net worth individuals (HNWIs) in the world has mushroomed in recent years. According to the Merrill Lynch/Cap Gemini Ernst & Young World Wealth Report 2001, the total pool of assets under the control of these individuals is around $27,000bn and rising. In addition to the growth in the private wealth market, the definition of a HNWI has changed. But, although the terminology used to classify the different levels of investors may vary, a common thread is emerging in the industry: the level of wealth necessary for an investor to receive asset management services is dropping. Traditional private client asset management, which was once considered the preserve of the elite few, is now becoming a benchmark of private investors’ expectations of the service they receive from those who manage their assets. The onus is now firmly on asset managers to provide a high level of service to their growing band of customers (assuming that business is expanding in line with the market). In all likelihood, asset managers will have to extend these services amid a climate of decreasing profit margins being ushered in by intensifying market competition. In such an environment the benefits derived from the judicious use of information technology (IT) are of critical importance to advisers who wish to maintain high levels of client service. Certain constants remain The benefits of IT are widely accepted and exploited for many aspects of an asset management operation. In certain areas, however, IT is used in relatively limited ways, namely client service and, more specifically, client communications. The servicing requirements of an investor depend on a range of factors, including geographical location and specific investment goals. Acquiring a full understanding of these needs is the task of the asset manager. Performance is often a key determinant of which asset manager a HNWI selects. The ability to fulfil the ongoing needs of an investor go beyond pure bottom-line figures, and poor account administration and service are frequently cited as a cause for dissatisfaction with an asset manager. In the vast array of investor servicing needs, there is one constant, which, while it may be affected by the specific mandate of the client, rarely vanishes. The investor will always need to know the status of their investments. Although the frequency with which investors might wish to be appraised of changes to their portfolios or the depth of information provided to them might vary, the need for such a flow of data from the adviser will not. Client reporting One of the principal means for an adviser to provide information to their clients is through periodic reporting. It is critical that such reports present investment portfolio data in a clear and comprehensible manner. Client reporting has undergone a dramatic evolution in recent years. However, despite the dawn of the information age, investor reports have often been confined to unformatted legacy system print-outs that include details of the clients’ investments that are difficult to read. Such reports have tended to be accompanied by a covering letter that contains whatever analysis and statistics an individual manager is able to prepare. This form of reporting is usually the result of limitations in the capabilities of the information systems available in an organisation. As systems and software have improved, more and more manual elements have been removed from the reporting process. Fund managers are now able to furnish client reports which include better and more digestible information without significant marginal cost to the business. This stage of development in client reporting is leading to well-structured and informative client reports becoming a standard rather than a pleasant addition to client service levels. Faster and more accessible The rise of the Internet has created a new paradigm of communication in society in general. Inevitably, there has also been an effect on client reporting. Investors with a technological background that differs from the traditional investor represent a significant proportion of the growth in the HNWI market. “Clients are more demanding and encompass an increasing diversity of needs”, says the PricewaterhouseCoopers European Private Banking/Wealth Management Survey 2000/2001. One of the corollary effects of this change in the profile of investors has been the manner in which reports can be provided to the clients. While electronically-delivered reports were previously sought by only a handful of an asset manager’s clients, increasingly, such modes of communication are viewed as a minimum by all private investors. While e-mail delivery of information is a means to decrease the delay in providing reports to clients, the capabilities of the Internet go far beyond this. The first stage in Net use was the provision of client reports from a secure website. These reports, while useful, were rudimentary and did not provide the clients with the ability to view data in any format other than that set by their asset manager. Recent developments in client reporting focus on giving the investor the ability to select their own views of data and the ability to drill-down into any areas of particular interest, thus providing dynamic access to their data rather than mere static images. The provision of such functionality is more than purely cosmetic. The combination of increasingly sophisticated investors and the fact that their time is at a premium makes this kind of flexibility of inestimable value. The Dilemma A newly-forged relationship between adviser and investor will often be characterised by a steady stream of two-way communication. The adviser will be seeking the information required to provide a suitable service, while the investor will be endeavouring to gauge the expertise of the adviser. After this initial contact, the frequency of interaction between investor and adviser tends to diminish. Often this is for the best because investors generally do not wish to be bombarded by huge volumes of information. Nevertheless, both parties will continue to have queries to address and information gaps to fill. Therefore, client relationship managers should have tools at their disposal that facilitate the exchange of required information. The Portal Technology can facilitate ease of ongoing communication between client and adviser. Investors have a wealth of information available to them directly from the Internet, including a wide range of financial analysis and news sites operated by retail banks and other financial institutions and intermediaries. It is important for relationship managers to provide relevant information in a timely manner to their clients. For instance, information can be conveyed to clients through the dispatch of direct electronic alerts when a matter pertinent to a client’s particular investment arises. Beyond this, it is possible to arrange online conferences between the adviser and individual clients, during which discussion of the client’s portfolio can be supplemented by on-screen graphical information which is visible to both parties.