by Fiona Maciver
The increasing complexities of building and maintaining distribution capabilities across Europe are putting asset managers under more pressure to differentiate their business from that of rival firms. Brand performs an integral role in attracting and maintaining distribution relationships but asset managers need to strike the right balance of brand ingredients to achieve recognition and grow fruitful relationships with fund selectors. To give a flavour of the drivers behind brand success with European fund selectors, Fund Radar takes a closer look at two of the most influential components highlighted in Fund Brand 50 – 20171.
▪ Fund selectors demand more than strong products from asset-management brands.
▪ BlackRock topples JP Morgan from number-one spot for the ‘client focus’ brand component.
▪ Nordea’s brand-preference ranking soars in recent years; its Stable Return Fund has hit a sweet spot and illuminated its broader investment approach.
First up is ‘client-orientated thinking’, which is one of 11 quantitative measures used to determine fund selectors’ ratings of asset managers’ brand performance. In this year’s rankings, this element eclipsed the more product focused driver of ‘appealing investment strategy’ to exert greater influence on brand success. But what does ‘client-orientated thinking’ actually mean? Essentially, this is about putting the client first and building more holistic relationships that extend beyond promoting in-house product capabilities; providing comfort to distributors that their business partners1 Fund Brand 50 is the annual study from Fund Buyer Focus(FBF) on the brand success of independent asset managers operating in Europe. It was published in March 2017.understand their needs and those of the end-investor. The merits of a client-focused approach seem obvious, but successful execution is often more challenging, particularly for a B2B industry that, until recently, has be enable to thrive on a product-push philosophy. This leads to an obvious question: is product important? The answer is simple: not at all! Finding the right product set remains key to fund selection but stiff competition has empowered distributors to embrace groups with a distinctive edge in their overall services. The change in relative importance of client orientated thinking reflects the need for alternative solutions to address market conditions and shifts in buyers’ expectations. The latter is often shaped by purchasing and service expectations in more consumer-driven sectors. For asset managers to achieve success in this arena, they need to work on embedding behavioural traits across business functions, from the back office through to client-facing roles. Sales teams are on the front line of service delivery but they will be ineffective if they are directed to simply push products irrespective of the client fit – those days are behind us. They need to be the conduit, the listener and messenger to ensure the relationship responds to the needs of the distributor, providing feedback to their colleagues elsewhere in the business on any support that is required. This encompasses multiple areas including:
▪ Client and product solutions.
▪ Information provision.
▪ Training and education.
▪ Frequency of contact.
▪ Deploying technology to deliver better client experiences.
The latter point is particularly interesting – the broad opportunities offered by leaps forward in technology include the facilitation of more bespoke client solutions, and the harvesting of data to provide a deeper understanding of clients’ needs. The following quotation from a British discretionary portfolio manager gives a selector’s take on this subject:
‘I think providers should make more use of technology and give more thought to the particular needs of the end-client, rather than just those of larger investors. For example, JPMorgan’s ‘Guide to the Markets’ app for advisers shows that this provider has a stronger focus than most of its competitors on gauging the needs of the end-client.’
In summary, managers demonstrating client-orientated thinking convey a mixture of behaviours relating to responsiveness, understanding, anticipation, empathy, adaption and relevance to distributor needs. They place the client at the centre of the business relationship.
Putting the client in the driving seat
Companies leading the way in client-orientated thinking are illustrated in the top-10 rankings in the table on this page. There were some significant changes at the top in 2016, with BlackRock toppling JP Morgan for number one spot. This highlights the increasing gap between BlackRock – Europe’s market leader by assets and several other measures – and its closest rivals. This shift coincides with identical changes in fund buyers’ rankings of the two groups’ competencies in marketing and communications, and sales and account management, with both crowns changing hands from JP Morgan to BlackRock. Regarding the latter function, BlackRock is highly rated across the underlying sales metrics but, importantly, a major strength relative to competitors is ‘understanding business needs’ of distributors. A forte recognised by this Dutch advisory portfolio manager: ‘BlackRock is very big and has some excellent people working for it, so it has the expertise and opportunity to cover all investment areas. It is very client-focused and, of course, its large share of the market makes it attractive to high-quality managers. I’d say it is the market leader.’
Over the last four years, Invesco has steadily moved up the rankings and it managed to jump three places during the year to December 2016. A combination of delivering product solutions to match market conditions, and improving perceptions of its sales and account management proposition have helped to strengthen views of the firm’s client focus. At the other end of the scale, M&G was the biggest faller within the top 10 in 2016, reflecting difficulties with its product palette – both in terms of suitability for market conditions and performance of high-profile funds. Highly regarded with fund selectors for its sales and marketing efforts, a pick-up in product performance and new product launches should all help to halt a further decline. Indeed, sales data for its blockbuster Optimal Income fund highlight an uptick in fortunes and may be indicative of improving selector impressions this year. Looking beyond the top 10, Nordea and iShares both made good progress over the year. The latter undoubtedly benefits from its parent BlackRock’s expertise but, interestingly for a passive provider, selectors recognise the company’s abilities other than a focus on price and product. Several other fund-buyer quotations explaining perceptions of different groups’ client-orientated thinking are presented overleaf.