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The 'customer' conundrum for traditional investment managers

Obsessed with the bottom line? Consumed by operational costs brought on by a myriad of regulations? Obsessed with the customer? Which of these is the odd one out?

When I posed the question to an investment management professional last week, the answer was unambiguous: “The first two are preventing us from reaching an obsession with the customer, whether we want to or not”.

However, with the impact of suitability and regulations maturing across investment management in the UK, is it now time for the industry to embrace customer centricity and associated innovations as an important trend for 2014 and beyond?

Focusing on value

Customer centricity, coined by the academic Dr Peter Fader, roughly translates as focusing on the lifetime value of a customer and adhering to the needs of the highest value customer segment to drive profit. 

Investment managers should be looking at the wider industry and their internal capabilities to understand where they want to play. Their aim should be customer centric propositions and tiered products that suit their customers. You don’t need to know Pareto’s law (or its business interpretation that claims that 80% of sales come from 20% of customers) to figure out the consequences of spreading yourself too thin.

One aspect that is clear -the world of execution-only services has merged with the fundamentals of traditional advisory services. The result - a solution for the mass affluent: cheap, personalised and accessible financial advice filling the ‘advice gap’ left by regulation. 

New and successful customer-centric brands like MoneyonToast and Nutmeg  were born out of socio-economic trends such as the growth of the mass affluent and High Net Worth Individual (HNWI) consumer groups and regulatory reform.

What is less clear is where a traditional investment management power house should pit its wits in the face of such disruptive innovation. To answer that question, customer centricity and profiling should be high on their ‘to-do’ list for 2014.

Getting the balance right

The real challenge for traditional investment managers is servicing the right customers and understanding their needs. Although mass affluent and HNWIs are becoming increasingly self-directed, most will still require face-to-face interaction when considering more complex investments. A balance is needed.

Within the confines of the chosen segment, the challenge is for investment managers to create customer centric services, through digital integration and customer-led innovation, in order to become more ‘obsessed’ with their customers.



Customer Centricity: Focus in the Right Customers for Strategic Advantage’ – Dr Peter Fader 2011




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