3 lessons for asset managers from financial advisors

Faced with accelerated disruption and an increasingly challenging operating environment, asset management firms need to strategically find new ways to engage their clients to ensure the long-term sustainability of their businesses.

Finding optimal ways to engage clients reminds me of the concept of ‘Advisor Alpha’, a term coined by Vanguard which outlines how a financial adviser can add value, or alpha, through relationship orientated services rather than always trying to outperform the market. Examples of these relationship services include the ability to gain a deeper understanding of the client’s objectives and behaviour, then using this knowledge to align the messages with the client’s unique relationship with money. 

By taking these insights and applying them to asset management, I believe the concept of “Asset Management Alpha" could take on a new definition. It could be defined as the deep understanding that the asset managers’ have of the financial adviser that allows them to offer value-add engagements which better align them to the financial advisor’s objectives.

While consistent track records and the asset manager’s reputation remain the primary considerations for financial advisors when selecting asset managers, there are some lessons asset managers can learn to secure relationships for the long term.

Lesson 1: Understand the financial advisors’ unique goals and objectives

To most asset managers financial advisors are defined as “fund buyers”, suggesting a more transactional relationship. By applying the concept of ‘Advisor Alpha’, asset managers should also use relationship orientated services to understand how to align with the financial advisor’s unique approach to advice. This means going beyond presenting product information and rather focussing on solving the financial advisor’s problems.

The best financial advisors are masters at knowing how to ask the “right” questions that elicit trust and create rapport while uncovering the financial and personal information they need to formulate the best financial planning recommendations. In the same way asset managers should move away from thinking about how to craft the best sales presentations and rather think about what best questions are to ask financial advisors, without being intrusive.

Just as advisors use their deep understanding of clients’ personalities to nurture better financial decisions, asset managers should also use strategies and sales processes that incorporate an understanding of the behavioural sciences to build trust with financial advisors. 

Lesson 2: Capture attention: Aligning investments with purpose

Some asset managers are finding new ways to deliver financial-advisor-centric experiences as they get feedback to the right questions.  Research has shown that typical asset management presentations or fund slide decks do not garnish much attention or recall. Over time, only a few things stand out, unfortunately, the research shows that what tends to capture attention is not necessarily what the fund manager is trying to get across. Asset Managers need to truly understand their differentiators and how to articulate them in a way that captures the financial advisor’s attention.  

Just as the best advisors know when to present certain information to clients, asset managers should look for opportunities to better align their marketing messages with the way a human brain manages its limited resources of attention and memory. Sales processes that incorporate better stories, removing unnecessary or conflicting detail tends to capture more attention.

Lesson 3: Education: Best practice and technical expertise 

Cerulli Research has shown that some of the top resources financial advisors want from asset managers include best practice learnings, client seminars, financial planning technical expertise and educational events. Not surprisingly, closer to the bottom of the list is the requirement for fund manager conferences.  

Strategies used to create effective learning might not be what many asset managers have been trained in however, a well-structured ongoing learning process can create an opportunity for better client engagement and long-term relationships. Finding new ways to digitally deliver these educational and learning requirements in an intimate way will be one of the key challenges, particularly for asset managers with very large bases.

Conclusion

Today there are an unprecedented number of ways for asset managers to assist financial advisors. Performance and even company reputations can vary through the course of time. Most advisors have understood this and therefore spend much of their time on relationship orientated services to better anchor their clients. Asset managers can only benefit by doing the same to ensure the long-term sustainability of their businesses.