Client communication best practice for asset management firms

By Michael Slemmer | 16 November 2017

Planned or unplanned. Formalised or ad hoc, every business communicates with clients in some way. For years, asset management firms routinely churned out cookie-cutter accounting and investment reports and other communications to stakeholders. Little thought was given to the format, frequency, accessibility, delivery medium or other individual needs of the recipient.

While this might have served the industry well even five years ago, as Bob Dylan would say: “The Times They Are A-Changin’.” 

For one, increased competition, particularly in private equity, means firms have to do more to attract investors. High-profile scandals like Madoff have had an impact as well by shifting priorities. While returns are still important, reputation and trust weigh more heavily in the decision to select one firm over another than ever before.

Then there are the Millennials. Currently 87 million strong, they are a dominating force in the market that outnumber the baby boomers by more than ten million. Having grown up with technology, Millennials expect and consume information differently than previous generations.

To meet the challenges of this shifting landscape with its Millennial heavy but still multi-generational audience, hedge funds, private equity firms, fund administrators and even family offices will need to rethink communications.

Wide-reaching benefits

Effective communications can mold an institution’s reputation and build trust, both of which are fundamental for any relationship-based business, but particularly for businesses that handle client assets. A foundation built on trust will help sell more products and services, which further engages the client, influences customer retention, and strengthens the relationship. 

Strong client relationships can sustain a firm in a down year. Clients are less likely to chase returns elsewhere if they have a personal connection and trust that you are looking out for their best interest. Communications can also be the differentiating factor that enables your firm to stand out from the crowd in a competitive industry. 

How and what is communicated to clients can impact a firm’s success. To ensure your communications hit the mark, following are six essentials to keep in mind.

Set the strategy

Communicating with clients whether it’s a fund administrator’s daily net asset value calculation, a cash flow analysis for the patriarch of a family office or a private equity firm’s investor newsletter – should not be an afterthought.

“Consider communications a business initiative,” advises Beverly D. Flaxington, The Human Behavior Coach® and founder of The Collaborative, a business training and coaching consultancy. Treating communications as a business initiative makes it a priority for everyone in the firm from the top down. 

Add value

In order for a communications initiative to succeed it needs a purpose, a reason for being.  “Communicating for the sake of it isn’t useful,” says Flaxington. 

Firms that are good at what they do often fail to communicate their success effectively. Or, they forget that the asset management industry is complicated and can be confusing to investors, even savvy ones.

Determine the goal of the communications based on the needs of your clients and the objectives of your firm.  Is it to update and inform? Provide thought leadership? Educate or show a point of view? Flaxington recommends that whatever the goal, communications should be consistent in message, reinforced regularly and add value. 

Make it relevant

While a 2016 survey by the Pew Research Center found that in general, “Americans appreciate lots of information and access to it”, the challenge is making sure the information you firm is sharing receives the attention it deserves. Even the most informative performance report, for example, won’t be read if it isn’t relevant to the person receiving it.

Relevance is the fine balance of delivering useful information, at the appropriate time, in a recipient’s preferred format. Get this right and you’ll not only cut through the clutter to remain top of mind, but you’re likely to strengthen engagement with your clients for long-term business success.

Know your customer

Making communications relevant starts by understanding each client’s needs. It’s not a one-size-fits-all, set it and forget it exercise. Every industry has a range of stakeholders with different needs, preferences and restrictions that continually change.

Hedge funds, for example, must address a growing institutional investor base with more stringent regulatory requirements than that of traditional high-net worth investors. A family office, on the other hand, might require a range of reports to satisfy everyone from the octogenarian matriarch to the 20-year-old grandson. 

Knowing your customer includes knowing the culture of the firm as well.  Perhaps social media is taboo for communicating information or maybe there is a hierarchy of preferred platform (i.e., text versus email) based on the level of urgency.

To engage all stakeholders across generations, a firm’s strategy should include a mix of communication types and delivery methods tailored to the needs of the audience.

Make it personal

“Clients are so infrequently asked for their preferences that when they are, they recognise it as being respectful,” says Flaxington. “Ask your client what they would like in the way of communications. Then, if possible, offer a choice or a menu of options.”

Let the client decide whether they prefer to receive investment reports daily via an online portal, for example, versus a weekly summary by email or a printed monthly statement. “Control is such a positive force from a psychological perspective,” adds Flaxington.

Making it personal doesn’t need to be complicated. If you develop the offering, deliver it across multiple platforms and let clients control the flow and type of information received, the communications feels personalised and has a greater chance of being relevant.

Embrace technology

Technology is the great enabler. Only by embracing technology will asset management firms be able to deliver meaningful, personalised communications that feed clients’ thirst for information.

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