By Philip Robinson, 29 April 2013Client Research | DB Pensions
Keeping institutional clients obviously makes financial sense. Research conducted in 2008 suggested that good client management can keep clients for more than 12 months despite investment underperformance. If that is the case then on a £100 million global equity mandate this equates to about £500,000 on a median fee (source: LCP).
At a recent Financial Services Forum attended by over 40 decision makers and chaired by Spence Johnson the focus was client retention. 5 clear themes emerged from the debate.
Firstly, good client management gives you longer time with clients. And that means precious fee income.
Secondly, it is all about people. Take people out of the equation in asset management at your peril! Most respected manager researchers state that the actual team makes up about 40% of a decision. I have conducted over 50 client audits in 5 years with over 2,500 pension decision makers (c £250bn globally) and the message is always the same – responsiveness to queries by a consistent team known to the end client is the most important criterion.
Thirdly, a few tips on what not to do. Client tiering is generally not good practice. I have war stories where a client realised he was a Bronze client and he told many others. Result – client loss! Industrialised reporting rather than bespoke doesn’t work either. And be careful on outsourcing administration as clients state that managers doing this get lower client satisfaction ratings.
Fourthly, take care on trying to ascertain the true costs of good client management. Portfolio managers will have to face the clients in times of underperformance and this is increasingly expensive!
Fifthly, listen to clients. Over 75% of asset managers undertake client audits either internally or externally with an independent. The trick is to act on the findings and ensure higher ratings in future.