Around the world, institutional asset managers face significant headwinds from smaller, lower-cost firms. As a result, they’re being forced to make a difficult decision: reduce their fees or stand their ground, relying on their track record of performance to justify their cost. Of course, in an environment where active fund managers haven’t always been able to deliver the alpha that investors expect, being able to combat fee compression isn’t always easy.
That’s particularly true when you consider that institutional investors are increasingly shifting their assets away from active managers. In fact, in 2017, actively managed assets accounted for just 69 percent fund sponsor assets, down from 84 percent two decades earlier. It’s because of this and other reasons that more than a fifth of managers planned to lower their fees in 2017 according to a Callan survey of US institutional fund sponsors and investment managers, with others having since followed suit.
Clearly, cutting fees isn’t an attractive option. But those firms looking to avoid that possibility can’t just rest on their laurels. They need to get creative not just in terms of how they structure their fees, but also how they provide and demonstrate value.
Show your clients you’re worth it
If you’re not interested in cutting your fees, you may have to look for ways beyond your track record to ensure that your clients are happy to pay them when lower-cost alternatives abound. Some of the ways you can do that include:
1. Spending more time with your clients
Your clients value face time and want to know that you’re always actively engaged in helping them meet their goals, not just at client review time. Of course, giving clients more attention isn’t just about being in the same room with them. You need to use that time to help educate them about the right products and services for their specific needs. Not only does that raise overall client satisfaction levels, it also creates upsell and cross-sell opportunities. To be able to dedicate more energy to your individual clients, you must be able to free up time in your day. One of the best ways to do so is by automating highly manual processes such as looking for and creating collateral that can otherwise take hours, if not days.
2. Creating more personalized client experiences
These days, clients want custom experiences that are completely tailored to their individual needs. And while that can play out in a variety of different ways, one of the most important is the pitch decks that you create for them. To provide true value to your clients, you can’t just use stock standard collateral with each and every one. Instead, make sure that your pitch decks reflect your understanding of each client’s unique situation, provide just the right solutions to meet their needs, and are appropriately branded. Not only are personalized decks like these much more effective, they also demonstrate that you’re tuned in to your client’s needs and that you see them as the individuals they are.
3. Cutting costs in other ways.
Another path to better service is to cut costs wherever possible in your business. This allows you to dedicate more resources to providing value to your clients. As we’ve seen, automating highly manual tasks like finding and creating collateral is one way to do this. Another is by helping to mitigate your company’s risk by ensuring that all of that collateral is always compliant with the latest regulatory requirements. All of this means that you’re not only able to move faster and more nimbly as an organization, but that you can also devote more attention to your clients, secure in the knowledge that you won’t be slapped with any regulatory fines.
Fee compression moving forward
As an institutional asset manager, you may find yourself between a rock and a hard place. You’re in a fee-compressed marketplace where you either have to reduce your fees or justify why you’re keeping them where they are.
If you’re going to hold your ground in the fee compression, it’s important to find creative ways to demonstrate your value. The right technology and sales enablement strategy can help. By automating your content creation process, it’s not only easier to create better, more personalized, and fully compliant content, but you can also save valuable time that you could then spend helping your clients. At a time when everything you can do to differentiate your firm matters, investing in the processes and technology that drive a customer-first experience is a small but important step.
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