Defend and maintain: Client retention key focus for asset managers

Rather than gathering new clients and launching new products, the key focus of asset managers right now is to ensure their existing clients are top priority in a bid to prevent outflows. 

Northern Trust’s Driving Growth in Asset Management 2024 global study found improving the investor experience is a top strategic objective for 70 per cent of respondents and is consistently named as a priority for firms.

Speaking to Money Management, Caroline Higgins, head of global fund services for Asia Pacific at Northern Trust, said this is driven by a desire of managers to retain existing clients amid a challenging time for active asset management rather than focus on growth. 

“The investor is the top priority, firms have really focused on defending what they have and that’s key strategy at this point of time. It is about defend, maintain and grow because losing clients is what they want to avoid. 

“You want to have an optimum operating model where it is very investor-focused, where investors like the experience, where you’re reducing risk and expense on an ongoing basis and that’s a big one.”

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They also want to deepen relationships and align their products with clients, especially those institutional ones. This has led to some firms opting to rationalise their product ranges or launch fewer funds than they would have in the past. 

Some 69 per cent of respondents indicated they seek to achieve this via product rationalisation, and 66 per cent said system consolidation.

“Growth used to be very generic; get more flows, get more clients, more markets and more products,” Higgins said.

“When markets are strong and insto investors may be pushing them to add products, then there is no harm in that if markets are performing and you’re in a growth phase. But when it is harder to get those returns, then you have to be very focused on your product offering and manage your expenses.

“I’ve seen a much more targeted approach now where if there is an area where they cannot maximise growth and where they can attract investors and find the right fit, then they are selling off those assets and acquiring those ones where they are more aligned.”

Last month, First Sentier Investors announced it would be closing four of its investment teams covering Australian fixed income, global credit, equity income and emerging companies. Meanwhile, firms such as Magellan and Platinum Asset Management have suffered with declines in funds under management. 

Commenting on the trend for product rationalisation, Dan Kemp, global chief investment officer at Morningstar, told Money Management that it is a trend the rating house has also observed.

“We are seeing asset managers be more careful about launches and those they are retiring. Morningstar has contributed to that in part as when we rate a fund, we do consider how responsible they are being with their fund ranges, we want to only see them launching good products.

“It is also a function of falling fees as when fees fall, then you need greater assets and you need confidence that the fund you are launching will be successful or your won’t achieve the necessary revenue. If you have fewer funds, then they need to accumulate a greater volume of assets to be successful. 

“Thirdly, there is a greater focus on customer outcomes and value for money to focus on outcome of the end investor.”