At BrandMatters, we have been in frequent contact recently with asset management firms that require strategic brand advice on how best to build out a differentiated offer across the increasingly cluttered and complex financial services landscape in Australia as we enter 2021. Previously defined propositions, that had been built out from market and client research, now feel somewhat outdated and not necessarily aligned to the evolving expectations and revised demands of members, investors, clients and shareholders. Asset management brands need to think more strategically about the structure of their business and how they go to market, to gain the confidence and support of their clients.
Brands in the sector have new conditions to navigate and the major pressures and trends impacting the asset management sector are likely to remain in place for the foreseeable future. By understanding these conditions, organisations will be better placed to respond proactively to the opportunities that have presented themselves.
Managing Director, Paul Nelson provides his insights on some of the most significant challenges and brand opportunities for asset managers in this new era.
Asset management brands are now expected to deliver better experiences for their clients throughout this continually evolving context. More sophisticated clients are showing signs of refusing to return to their pre-pandemic ways of interacting with asset management brands. The prevailing levels of cynicism, confusion and mistrust with the structure and presentation of the asset management industry has contributed to more demanding clientele, who expect above all else, transparency. For investors, their natural anxiety throughout volatile markets will require brands to respond with more positive client experience, a more humanistic approach that favours consultation and active involvement.
Demonstrating assurance and capacity to handle turbulence, especially in periods of increased redemption activity will be critical for brands. There is a clear opportunity for brands to refresh their overarching positioning and the most cost-effective way to shift their narrative is to reflect these changing conditions. A strategically re-positioned brand can present a refreshed intent and purpose, and for asset managers, it enables more contemporary thinking and a diversity of attitudes to reverberate positively throughout the business.
This shift to a more consultative selling mindset has implications for brands who persist with a ‘product flog’ strategy. These days are well and truly over. Forward-thinking brands will take a much stronger needs-based, consultative approach. These same managers will need to operate to maximise transparency around fees and charges, whilst also navigating older, legacy processes and technologies that they still have in place. These technical and tactical deficiencies are further impacting the overall client experience, whilst simultaneously making the case for more self-directed investing tools for end investors more compelling: ‘If I can manage my investments through an intuitive online platform solution, do I really need to pay the fees associated with an adviser?’.
Beyond investment technology platforms, clients are also seeking great investment insights in a way that is clear, meaningful and contemporary. That is again a challenge for many asset management brands who are using old and outdated technology. It turns up not just in insights but in the way you deliver and explain your performance in your reporting to clients. Are you still emailing flat charts in a PDF or is it served within an interactive and dynamic app? It is critical that every interaction with your client is helping demonstrate that your brand is contemporary in not just thinking, but also in reporting.
Across the sector, asset management brands are now increasingly expected to demonstrate some tangible capacity to deliver returns in a positive and impactful way, through an understanding of ESG. Impact investing is no longer a niche or ‘nice to have’ within a well-structured portfolio. Whilst there will always be some investors with a single priority around financial returns, a growing number of investors expect asset management brands to make ESG issues integral to their investment strategies. A recent Morgan Stanley survey showed that at the end of 2019, almost 80% of institutional investors view sustainable investing as a risk mitigation strategy. Not only are these strategies increasingly popular, but they are also increasingly competitive, where brands are expected to demonstrate authenticity and tangible evidence that they align with the philosophy behind each strategy. The reality is that at this stage, these ESG capabilities will be new territory for a great many financial services brands, and many asset management brands will have much work to do.
With this sustained interest and momentum, now is the time to rethink your organisation’s purpose and look to make social and financial returns symbiotic. Rethink your brand’s approach to ESG, and then ensure that it is communicated throughout your brand narrative. Keep in mind, you need to demonstrate with proof points on this commitment or risk being called out for ‘greenwashing’. The most focused investors will expect your brand to have a clear criterion for investments, to exert your influence as a shareholder and report the results you’ve achieved.
Perhaps the most significant pressure impacting brands in the asset management landscape is the breakdown of vertically aligned channels (manufacturers who own distribution) and the subsequent seismic departure of the Big 4 from the sector. The background of this has been reported on previously by BrandMatters, but relates to two main areas: the inwardly focused remuneration schemes that prioritised sales and profit over client benefit, and a ‘win at all costs’ culture that existed in many parts of the industry prior to the Royal Commission. In response to this, major banks have looked to exit from different components of their offer and these implications are being extensively felt across the asset management landscape. This has instigated in a re-ordering at the top of the industry, along with a rapid rise of newer, unaligned brands popping up that are still catching up with this new world order and their place in it. Many we have spoken to are unsure how to maximise their newfound presence in a vastly different market and competitive environment.
For these newer asset management brands with more clouded propositions, there is an opportunity to better calibrate yourself and align with the expectations of your clients. Ask the questions, through well-defined and well-articulated brand research, what do clients expect and value? Then you can better understand how you can move quickly to deliver on this. Research provides a blueprint for both brand and business strategy moving forward as insights and implications can be tailored to report on both current and future conditions. It also provides guidance for what you can realistically stand for, as well as what you should be known for within the cluttered marketplace. In this increasingly complex environment, it is crucial to future proof the overarching strategy with well-defined insights.
Turbulent times present opportunities for asset management brands
The asset and wealth management industry excel in problem-solving and pivoting across different operating environments and market conditions. So, despite this ongoing turbulence and uncertainty, the outlook for brands across the asset management sector is not all doom and gloom.
While there are many challenges to be confronted as we enter 2021, the bottom line is that the industry, its workforce and clients will continue onwards. In fact, the industry will continue to learn from the experience and become stronger for it, even increasing its importance in the financial markets through its role in rebuilding the Australian economy.
Realistic and powerful opportunities, such as those we have identified, will continue to present themselves across the asset management industry. These will benefit brands who can positively and proactively seek to understand and adapt to the new environment.