With many investors taking a more holistic approach to portfolio construction and wanting to understand the risk and return drivers of their total portfolio, asset managers will need to adapt the way that they engage and communicate with their clients in order to be successful.

As mentioned in the previous part of this series, having a clear understanding of a client’s overall objectives and their expectations about the role a particular strategy will play in the context of a wider portfolio, is crucial. By being wholly clear on an investor’s requirements, asset managers can not only demonstrate the merits of their offering but can begin to build the long-term partnerships that are increasingly becoming the cornerstones of commercial success.

This necessitates action from managers, both at the initial stage of the relationship as well as ongoing client management. 

At the early stage, managers must ensure they are listening to and understanding the client’s perspective and responding accordingly. A focus purely on investment process and performance, as managers have done in the past, is no longer sufficient. Conversations and information need to go much deeper in the explanation of an asset manager’s strategy, including the drivers of returns, risk profiles, potential correlations to other factors and exposures and, crucially, patterns of performance, so that clients know what to expect in different market scenarios and can consider this in the context of their other exposures.

As a starting point I would expect a good relationship manager to:

1. Know the client’s mission and values, including time frame.
2. Know their Governance Structure
3. Know their risk tolerances
4. Know what their overall portfolio looks like and where their strategy fits. 

With a TPA approach it is key to understand there is competition for capital at the total portfolio level – is there an asset manager who will advise a client to take money out of their strategy if they think it is expensive? Maybe, but more likely not. However, if the client makes that decision, the good relationship manager will be forewarned and may be able to guide the client towards something more attractive, that maybe they already manage. 

Going forward, this mindset also needs to be applied to ongoing engagement. Regular communications is vital, both in good times and bad, but this has to be moved on from the narrative of “this is what we’ve delivered for you this quarter…” to clear-eyed, objective assessments of how a strategy has done and what can be expected over the coming quarters in the context of market conditions. 

Information that is short, sharp, timely and is preferably differentiated (perhaps a perspective or interpretation of a trend that an audience may not have thought about before) is much more likely to resonate.

Understanding client’s communications preferences is also important in this context. There may be a few exceptions in certain markets, but increasingly the days of lengthy reports or letters are over. We must accept that what worked in the past may not be appropriate for many investor audiences today. People are busy, attention spans shorter, and there is a strong preference for content that can be easily accessed. 

My sense is that asset managers are, in fairness, beginning to adopt at least some of these points but it is happening slowly and a real acceleration is needed, particularly if large clients are ahead of them in their thinking. A variety of factors including more volatility in markets, consolidation, new industry structures and a changing investor demographic is shifting the landscape substantially and asset managers must respond. Those that fail to do so risk being left behind; those that succeed stand a real chance of building and maintaining those long-term client relationships critical to commercial growth.

JPES works closely with asset managers to advise on key aspects of messaging and audience engagement to meet underlying investor needs. Our services include:

• Presentation reviews and training
• Messaging development
• Reviews of key marketing collateral
• Client perception audits
• Communications strategy and media engagement

For more information on our services, please contact matt.rogers@jpespartners.com