A report by Greenwich Associates revealed that strong client service capabilities can act as an important mitigator of outflows for asset management firms. A survey of 58 investment houses, found that outflows of segregated account assets were significantly higher for firms with a client servicing capability that was poorly-rated by pension plan sponsors.
Greenwich Associates consultant Rodger Smith, commented: “Senior executives at asset management firms appear to understand the importance of client service, rating it the third most important factor to achieving business objectives behind only investment performance and senior management team strength. Nevertheless, US asset management organisations continue to under-invest in this key function.”
The report, Competitive Challenges, showed that only 4 per cent of operating expenses are spent on client service compared with 40 per cent on investment management. Other important drivers of profitability such as sales, executive management and marketing accounted for 8.4 per cent, 7.4 per cent and 5.4 per cent respectively.
Greenwich pointed out that as the closure of defined benefit pension plans by corporate plan sponsors led to a shrinking DB asset pool, the ability to cross-sell products and retain clients would become critical to asset retention and growth in a more competitive environment.
The research also revealed that success in client service is not dependent on higher levels of spending alone.
Mr Smith said: “The research shows that a few best-in-class firms are able to deliver a superior level of client service at lower expenses than the majority of their peers. But in many cases, increased spending may be the necessary first step that poor performers must take to improve their client service quality.”
HS
