Client engagement: a golden opportunity for asset managers

Better client interaction is key to client retention, says Meradia’s Tim Jager

by | January 31, 2022 | Meradia

A key goal for any business is retention – ensuring a customer or client does not switch to a competitor or remove themselves from the market altogether. In general, retention is achieved through engagement – whether that be physical or, in a post-Covid world, virtual interaction or communication.

 The asset management industry is no different. According to Tim Jager, a principal at investment operations and technology consulting firm Meradia, asset managers must prioritise the customer experience and communicate effectively to ensure they keep clients on board.

“While clients engage you to support the growth of their investment portfolio, performance alone will not keep them. The number one reason a client leaves is a firm’s lack of responsiveness,” says Jager.

He adds that little to no proactivity, and a lack of new ideas to grow a client’s portfolio, are also key reasons clients tend to leave firms. Perhaps surprisingly, however, performance of an asset manager is a less-important factor in determining whether a client takes their capital elsewhere. “The real key here is how do you communicate with your client. How do you engage with them?” Jager says.

Research from Capgemini suggests wealth management clients value personalised interactions from their asset managers, with over 60% reporting unsatisfactory experiences.

Given the amount of information now available to members of the public, ever more knowledgeable clients expect more detailed information from their asset managers specific to their portfolios.

Crucial to keeping up strong communication between asset manager and client are client reports, which are sent out on a monthly or quarterly basis, says Jager. In some instances, clients can set reporting parameters, including insight on specific trades rather than an aggregated overview of a portfolio’s performance.

Benefits of client-focused technology

To help asset managers adapt their interactions with clients and differentiate themselves from competitors, many have begun to utilise new forms of technology to better understand how communication between firm and client impacts retention. Some tools have also helped firms ensure their communication can be bespoke.

“Technology has come a long way in terms of understanding the interrelationship between a firm and its clients,” Jager says. “Firms can now track where a client goes within a report, what they look at, what’s meaningful to them – and what’s not,” he adds.

Technology like this can be incredibly powerful to firms as they begin to learn what their clients need and can thus start personalising communications. Additionally, these tools will allow asset managers to access and leverage the various datasets at their fingertips to better-understand their clients’ journeys.

“Asset managers can now use that communication channel, so it becomes a meaningful conversation both ways which goes back to one of those reasons a client leaves – a lack of new ideas,” says Jager. “By providing alternative products that fit the client better than what they’re currently using, firms are adding value.”

Being able to stand out from the crowd in this way is becoming increasingly valuable for asset managers. A report by Cerulli Associates found  firms generally use the same 10 phrases to describe their asset management businesses, highlighting how easy it is to be seen as just another asset manager by using generic terms.

“The big risk is in those first two years of a client relationship,” Jager says. “The client is paying especially close attention to what you’re delivering during this time.”

Jager notes firms tend to lose around 20-25 percent of new clients during the first two years. Clients pay closer attention to what is being delivered during that time. This tails off quite quickly in the years that follow.

“Investment managers have an opportunity to make a greater difference in the client’s first couple of years with the firm,” Jager says.  During this time, however, many managers have their focus on bringing in new business. “The communication channel can help you win new business as well as retain what you already have,” Jager notes.

In the investment management space, competition for clients is fierce. As a result, Jager warns firms that do not change their engagement strategies are likely to fall behind.

“Time is marching forward, technology is marching forward, the evolution of communication is marching forward. And if you’re standing still, you’re not keeping up,” he says.

The key question firms and managers need to continually ask themselves is: how do I keep up and engage with my clients?



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