Archive for July, 2009
A manager mentioned to me recently that their marketing and sales people and investment people are not on the same page with respect to products. The investment people know in their hearts that they can deliver certain investment capabilities to the marketplace, but their passionate pleas fall on deaf marketing ears. The marketing and sales people are certain in terms of what products and capabilities the marketplace demands, but their claims feel ignored by the investment staff. How can they improve their communication and arrive at consensus? Who should drive the process?
The answer is that it needs to be a collaborative process. Investment personnel are in the best position to know their strongest investment capabilities. Marketing and sales personnel are in the best position to understand marketplace trends, what is being demanded by their client base, and the state of the competitive environment. All of these factors must play a part in making important commitments to product development. Often a product development function exists to coordinate all of this. But with or without that function, communciation forums must be created to exchange information across departments so that all critical personnel arrive at the same conclusions with respect to product development and delivery. It is very important to create an open environment where all views are vetted and respected. Investment management requires a team oriented culture, not a rigidly divided one by function.
July 28th, 2009
One of the issues that institutional asset managers ask me the most about is their sales/service model. Should sales people also manage client relationships? Isn’t it a different skill set? Shouldn’t the best sales people be constantly looking for new clients in order to grow the business while others nurture existing relationships? The answer I most often give is that in the institutional business, sales and service are not distinct, but rather occupy different points on a continuum. In this business, sales is all about long term relationship building where the sales person gains credibility over time with the potential client. Service is about long term relationship strengthening where the client receives frequent value added communications and hopefully adds more assets in both existing accounts and cross sold products. Some professionals are better at bringing in new clients while others are better at servicing existing clients, and perhaps cross selling. Their respective responsibilities should align with their strengths. But organizations should be careful about drawing more of a functional distinction between sales and servicing than exists in practice.
July 22nd, 2009
Selling investment management services to institutions has always been a consultative process. Sophisticated investors want to understand and appreciate the capabilities of an asset management firm. This knowledge is generally transferred over a period of time in a series of encounters between personnel from the asset manager and institutional investors. However, for quite some time, the marketplace has forced these capabilities into buckets with specific names. Initially they were styles within asset classes, such as large cap growth and high yield fixed income. Then, we had the division between traditional and alternative investments. This has been followed by more solutions-based strategies such as Liability Driven Investing.
When businesses flourish, there is a tendency to keep things the same as much as possible. Therefore, changes in business approach are slow, and the investment management industry has experienced this until recently. For example, the death of style boxes has been discussed for many years, but many manager searches still are defined by style box. However, industry and market events of the past year are likely to disrupt this relative stability. More and more managers are telling me that their opportunities are now about specific customized capabilities rather than defined products. Artificial distinctions between alternative and traditional strategies are blurring. Easy labeling is fading in favor of specific descriptions of capabilities designed to meet specific client needs. In order to succeed in this new environment, managers must meet the challenge of convincing institutions that they can fit their capabilities to client objectives, while continuing with their focused consultative approach.
July 20th, 2009
It seems prudent right now to be cautious with spending. Profitability at asset managers is way down in 2009, primarily driven by the drop in asset values. It’s not clear yet, as it never really is, where markets will be going , so it seems prudent to limit all spending. Budgets set early in the year are very tight. As I speak to managers, many seem to be waiting for the Fall to set their budgets for next year and to assess whether they have any discretionary spending left this year to hire employees, and fund discretionary spending such as advertising and conference sponsorships. But another way to look at things is through the lens of value resource spending, which is like contrarian investing. Because most managers are not spending freely, there is a lot of talent that can be acquired at deep discounts. A contrarian value resource spender should strongly consider hiring this talent, and using some discretionary spending, while they have the leverage in the marketplace, before the spending rebound occurs this Fall and in 2010. Investment managers should evaluate their budgets and spending patterns as a value investor would.
July 12th, 2009
Why can’t I sell more? When I talk to managers, I get this question all the time. To some, it seems that it should be simple. Develop a good investment product, hire some talented sales resources with contacts, and off you go. The truth, of course, is that there is much more to it than that. Most managers don’t realize how competitive the business is. For the majority of asset classes, there are many strong managers. In order to compete effectively, a manager must clearly differentiate its products and capabilities, and promote them through a well crafted marketing plan. Over time, this will generate “demand pull.” Then, talented sales resources can be more successful. Otherwise, they can spin their wheels and management can waste a lot of time and money. In the best of cases, patience is required as it takes time to build a client base. Look for my next white paper coming out this summer which touches on much of this.
July 7th, 2009
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