We are a relatively small investment management firm that has always had at least 3 salespeople who do just about everything from writing RFPs to updating industry and consultant databases, attending conferences and making sure the clients receive our quarterly report. My worry is that they are spending all of their time travelling and trying to bring in new accounts and the clients are really getting neglected. What are some of your thoughts around this issue?
Is a dedicated client-service professional worthwhile?
Non-existent or poor client service is potentially a very serious problem and will most likely lead to general dissatisfaction with the relationship between the asset owner and asset manager.
Even if your performance is exceeding your benchmarks — be they relevant indexes or universe comparisons to your peer group or, at a minimum, meeting your client's expectations — your clients need to have regular and meaningful contact with your firm. Most investment managers have dedicated client-service professionals unless the firm is so small that this function is carried out by the sales staff, portfolio managers and/or “senior management”. Your salespeople could perform this important function, but from your description, it sounds like they are very motivated to bringing in additional assets.
It would be important to note here that an individual's “behavior” is directly linked to the structure of one's total compensation. I assume your salespeople receive a base pay and incentive compensation based on the fee revenue generated from business they bring in. This is not only normal, but also clearly preferable to a compensation plan that has a base pay plus some subjective bonus determined by the person to whom they report. But I digress.
My point is that assuming your salespeople have the communication skills and patience to deal with clients, then perhaps their incentive compensation should be contingent on client retention and even cross-selling other products of your firm.
If your firm doesn't want to dilute the new-business effort, then you really should consider bringing in an experienced, client-service professional. A detailed communication plan should be created by this person, and I would do some basic “market research” by reaching out to your clients and asking them what form, content and frequency of communications would best meet their needs. Of course, there is plenty of industry intelligence and anecdotal evidence that one could build on, but why not ask them? Questions could include:
- Do they want to be able to get product and account information on-line through a password protected site?
- Do they want quarterly in-person meetings with portfolio managers and perhaps the CIO?
- Do they read your current quarterly report and, if not, what could you do to make it more readable, memorable and effective in communicating what transpired over the past three months — if indeed quarterly reporting is preferred?
This report, by the way, should include at least your assessment of the economic and market environment, how your firm interpreted this and what course of action it took that affected your portfolio. You should include any change in personnel — both in and out — and how this has affected or will affect the firm. The last thing your client wants is to be surprised by something they should have known about and learned about from you. The minute your client discovers something negative about your firm for the first time either reading about it in the press or hearing about it from other clients, you are toast. This situation would be entirely preventable with good client-service professionals and with a solid and well-articulated communication plan.
Retaining clients and their fees is immeasurably more cost effective in running an investment management firm than trying to bring in new business.