Client Service 3.0

At that point in time when boutique asset managers morphed from practices into businesses—during the mid-1970s—a new concept of client service emerged. Initially, it arose from the recognition at a handful of firms—with Wellington Management and Putnam Investments to the fore—that the predominant client-facing model was flawed. 

That model consisted of salesmen entertaining asset owners and trustees, with those entertainments spanning the acceptable to the tawdry—the domain of the 40-something white male with a glib tongue, a strong liver, and an expense account. 

This worked well for a long time—too long. The executives who ran asset managers were primarily investment types, and what mattered was the investment process and results. Sales and client service were paid only lip service. 

Yet today client service matters, and matters hugely.

While asset managers have long understood that there was a competitive opportunity for inserting a layer of investment professionals (as opposed to sales executives) between portfolio managers and clients, its implementation has been notably uneven. But the empowerment of the asset owner is turning client service into what it always should have been: A window into the asset owner’s needs, as opposed to a vehicle to expedite product sales. The best of these client-service individuals understand their clients’ overall portfolios and liability profiles, and the best of them focus on products (or, to use the current argot, solutions) that actually make sense. 

But here’s the rub: Quickly, the thoughtful client service executive is becoming less axiomatic. Now, allocators want technology and access to data and models; he wants the ability to model portfolios and refine asset allocation and risk. The managers that adapt to this new reality, and create the client-facing tools and technology to enable this type of interaction, will be the winners in this arms race. This challenge faces all providers, not just asset managers, and is only amplified by the trend to outsourcing. 

It is conceivable that independent platforms rather than providers come to dominate this new space, as it has in the advisor space. But the challenge for asset managers is to ensure that Client Service 3.0 stays in their domain—and the bet here is that it can’t be taken as a given.

Charles Ruffel was the founding editor of CIO. He is now co-CEO of Kudu Investment Management.