Strong Relationships, Client Service Minimize Asset Losses

Asset management firms can lower client losses and stem asset outflows by improving their relationship management and client service capabilities. Investment performance is the most important defining element of client satisfaction for fund managers, but relationship management and development is a key factor in client retention, said Greenwich Associates consultant William Wechsler. In a recent study conducted by the firm, results show that managers with poorly rated client service functions or relationship management efforts are at a significantly higher risk of client terminations than competitors with strong capabilities in these areas, even taking into account past performance.

"All asset managers suffer client terminations during a run of bad performance," explained Wechsler. But in looking at firms with poor investment performance over a five-year period, Greenwich found those with below-average client service lost USD150 million more for every USD1 billion in assets under management than managers with above-average client service capabilities. The findings of this research enabled the firm to estimate the value of client service investments in terms of assets under management.

"In the end, time runs out if performance doesn't improve," said consultant Rodger Smith. "A manager might fool himself for a time because termination rates don't spike after one or two years of poor performance, but in reality the risk increases with each passing day." Some fund managers recently bolstered client servicing teams. Merrill Lynch Investment Managers appointed Gareth Davies as director of its U.K. relationship management team for institutional business in London (GMM, 30/05), and Fidelity International appointed Nick Baulch as a relationship director for its U.K. institutional client relationship team (GMM, 24/05).