The asset management industry is undergoing a seismic shift. A perfect storm of economic uncertainty, heightened regulatory scrutiny, and evolving client expectations is forcing asset managers to fundamentally rethink their business models.
Profit margins are shrinking, competition is intensifying, and the demand for transparency and accountability has never been higher. At the same time, clients are increasingly expecting a digital-first experience, akin to the service they receive from their banks.
To thrive in this challenging landscape, asset managers must prioritise client engagement and deliver exceptional service while navigating a complex regulatory environment.
Central to this regulatory shift is the UK’s Consumer Duty policy, introduced by the Financial Conduct Authority (FCA). The rules impact all firms that distribute or manufacture products and / or services to retail clients and it forms a key part of the FCA’s 2022-2025 strategy. In principle the policy requires firms to act in their clients’ best interests and ensure their products and services yield good client outcomes.
This regulation should form part of the strategic planning for asset managers and boards must take full responsibility, maintaining oversight and challenging appropriately.
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Consumer Duty underscores several critical areas for firms to address:
- Gaps in client data: Firms must identify and rectify any missing information about clients holding closed products and services to demonstrate these offerings continue to deliver good outcomes.
- Fair value: Companies need to assess and confirm that their products and services are transparent and offer fair value to clients, ensuring no one is left at a disadvantage.
- Vulnerable clients: Identifying and mitigating potential harm to vulnerable clients is paramount. Firms must understand the unique needs and risks faced by these individuals.
- Gone-away or disengaged clients: Efforts must be made to re-engage with clients who have become inactive or unreachable, ensuring they are not inadvertently neglected.
- Vested contractual rights: While firms are not expected to relinquish vested contractual rights (such as annual fees), they must consider alternative ways to minimise potential harm to clients holding closed products.
Achieving consistent, good client outcomes requires a cultural shift from focusing on internal processes to prioritising client needs throughout the entire journey. This article offers asset managers a new lens through which to view this challenge, drawing on the product-centric mindset of the tech industry to develop strategies that help move towards compliance.
Learning from tech companies
Tech companies have long understood the power of putting the user first. They achieve this through a product-led approach, which prioritises in-depth market research to understand user pain points and desired features. This research feeds into the design and testing of iterative prototypes, with continuous client feedback guiding further refinement. Here’s how investment managers can benefit from adopting similar practices:
Image: jlmelectrical.co.uk
Market research
- Beyond returns: Conduct surveys, user testing, and focus groups to understand investor goals, risk tolerance, and preferred platforms. Understanding what truly motivates clients can inform better product development.
- Example: Amazon’s customer insights – Amazon are true leaders in this space, using data and insights from extensive market research to understand consumer behaviour and preferences. This approach not only informs their clients about their product and service offerings but also highlights the importance of data-driven decision making.
Client segmentation
- Tailored solutions: Developing products tailored to specific client profiles like young professionals, retirees, or socially conscious investors. A one-size-fits-all approach no longer serves today’s diverse investor base.
- Example: Netflix’s personalised recommendations – Netflix segments its user base to provide personalised content recommendations, enhancing user satisfaction and engagement.
Minimum viable product (MVP)
- Iterative feedback: Launching a basic product version to gather real-world user feedback. This allows for faster adaptation than traditional product rollouts and ensures the final product truly addresses client needs.
- Example: Slack’s MVP approach – Slack started as an MVP, continuously refined based on user feedback, leading to its current success.
Data-driven decisions
- Behavioural insights: Leveraging data analytics to track user behaviour, identify areas for improvement, and personalise the investment experience. Data is key to understanding clients and tailoring solutions to their evolving needs.
- Example: Google analytics – Google uses data analytics to understand user behaviour and optimise its products and services.
Continuous improvement
- Culture of experimentation: Embracing a culture of experimentation and iteration. Regularly testing and refining products based on client feedback and market trends.
- Example: Apple’s iterative design – Apple continuously improves its products through iterations based on user feedback and technological advancements.
Image: apple.com
Benefits of a product-led approach
By adopting a product-led mindset, asset managers can achieve significant advantages:
- Enhanced client satisfaction: Products that truly address client needs lead to higher satisfaction and loyalty. A happy client is a loyal client.
- Improved client retention: Understanding investor behaviour helps anticipate needs and address potential churn. Proactive engagement builds stronger relationships.
- Differentiation in a crowded market: Products with unique value propositions stand out and attract new clients. In a competitive landscape, client focus sets you apart.
The road ahead
The transition to a product-led approach requires a cultural shift within asset management firms. Here are some key steps:
- Empowering design teams: Create dedicated teams or partner with specialists in user research, product design, and user experience. These teams will champion the client perspective within the organisation.
- Data-driven decision making: Most asset managers have been investing in data analytics tools, the importance is building a culture of data-driven decision making. Data provides valuable insights to inform product development and client engagement.
- Investing in technology: Utilise platforms and tools that facilitate user research, product development, and data analysis. The right technology empowers your teams to deliver exceptional client experience.
Kurtosys can help asset managers deliver investor communications outputs across the entire investor lifecycle. Designed with the client’s needs in mind, we deliver:
- Pre-built communication templates using our plug in for Office and InDesign to personalise documentation for different customer segments, including those with vulnerability characteristics.
- Multi-channel communication via our digital portals and tools, along with email distribution ensures customers can receive information across their preferred channel.
- Interactive client portals that allow customers to easily access product information, performance data, and communication materials.
- Inclusive design to ensure your client portals and communication materials are accessible to users with disabilities, aligning with the FCA’s focus on fair treatment.
The future of asset management belongs to those who prioritise the client experience. By learning from the success of product-led tech companies, investment managers can build a future focused on delivering superior client outcomes and meeting the evolving expectations set by regulations like Consumer Duty. Embracing a client-first approach not only ensures compliance but also drives long-term growth and success in an increasingly competitive market.
