Fund providers need to go beyond providing fund performance data to deliver insightful information...

Most purchases we make provide almost instant gratification. This means it’s very easy to know whether we’ve bought something that lives up to our expectations…or not. This could be driving away from the car showroom, enjoying a meal in a restaurant or taking delivery of the latest smartphone. All of these purchases are tangible and our satisfaction is therefore immediate.

Fund management on the other hand is an unusual thing to purchase because it’s intangible and gratification is deferred.  An investor sacrifices current purchasing power, and foregoes immediate gratification, in exchange for a hoped-for superior benefit (aka profit) in the future. In the absence of instant gratification, confidence needs to be instilled and maintained, in order to reassure the investor that they’ve made the right purchase decision. In the investment world, satisfaction and confidence can be a fragile thing to maintain, particularly during periods of volatility. Yet, maintaining customer confidence is an area where many investment companies struggle. But this needs to change soon.

The investment industry has largely remained virtually unchanged since the 1920s, which means when it comes to keeping customers informed, fund providers have tended to focus on the provision of data rather than information. Go to a fund provider’s website or get a brochure or factsheet and all you’re likely to see is past performance stats (up to a month and a half out of date), accompanied by various other data points – for example top ten holdings, sectors and countries the fund’s invested in. Providing information – context about where and why the fund manager is investing and alternative ways of interpreting data - is pretty much alien to the industry today.

Given the amount of money that customers are investing it’s surprising how little they can find out before they part with their money. Like religion, the relationship between the fund manager and the investor has relied on faith rather more than proof, with the occasional performance miracle satisfying the latter requirement. Like the medieval Latin church service, an exclusive club of financial advisers and institutional clients converse with the fund manager in a language unfamiliar to their respective congregations. They then act as conduits through which the same old performance messages are delivered to the faithful flock.  

Clearly post the global financial crisis and with more discerning investors it’s a situation that isn’t sustainable. So what’s needed? Empowering customers through information seems like the sensible solution to this problem, but customer empowerment is something that would take most asset management companies completely out of their comfort zone.

In order to do this, the investment industry needs to take a step into the digital world that many of their customers have been accustomed to for a while. With customers’ digital expectations continuing to rise and regulatory changes - such as the recent pension reforms – we’re seeing more people take a much keener interest in their investment affairs. This will create a growing and much more demanding segment of investors that are getting used to accessing information and interacting with it instantly, but also presents an opportunity to get closer to customers, while also helping with the regulatory requirement for greater transparency. 

Yet in a recent PwC survey, more than a quarter of asset managers were not sure whether the use of mobile technology for distribution or communication, would play a critical role in their business.   The expectation gap between customer needs and asset managers’ slow take-up of technology needs to be closed, and soon, because we’re on the verge of a revolution.

Customers will not be satisfied with a cumulative performance chart and a few snippets of static information. They want context because they need to understand why their investment is going up or down and most importantly how their fund manager is reacting to this. This requires a new digital approach – a platform where customers are presented with information rather than data – where performance is real-time, commentary is used to provide context and holdings data is comprehensive and transparent.

There are asset managers out there who are beginning to look for more progressive ways to engage with their customers and deliver information rather than data. And these are the ones that are going to lead a period of significant change within the market.