The Luxembourg investment fund association (Alfi) held its annual conference on 13 and 14 March this ...
The subject to which the conference turned again and again was technology and the internet.
Speculation and advice was dolled out at high speed and in large quantity on how to deal with potential problems, how to profit from the possibilities of using the internet to distribute funds, develop client relationships, and how to use technology to improve the efficiency of the back office.
Investors are using more and more different ways of communicating with their providers. They come in person, telephone, send letters, fax, e-mail and through the web. They expect both to be able to receive information using all these channels and to be able to send instructions, again using all of the above, but with the possible exception of the web at the moment.
Whatever their differing opinions on methodology, all speakers agreed on the importance of remaining on top of technological advancements in order to provide investors with a top-class service.
Another vital part of client service is transfer agency (TA), and the conference spent some time on the changing nature of TA - firstly, considering how competition for third-party TA work is heating up, and secondly, looking at how important technological innovation is in providing accurate and flexible TA services outside the core functions, such as handling redemptions, subscriptions and switches.
Thomas Seale, CEO of European Fund Administration, said that proprietary distribution in Europe had gone down from 83% last year to 77%. Previously, banks did most of the distribution through their branch network and through nominee shareholders. This hegemony is still in place in some countries, but things like internet order-taking help to undermine it.
Seale said: "The distribution of funds in Europe is incontestably opening up. A sophisticated TA system is needed now."
John Yates, from Goldman Sachs International, gave a possible insight into the future of TA by looking at what had happened in the US over the past 15 years.
He stressed that the emphasis in the US was on instantaneous customer feedback - real-time processing, not just book-keeping. This was combined with internet access and control of accounts and services, integrating all technologies seamlessly. The type of development required to make robust, complex software of this type is, however, expensive to write, and needs continual upgrading as computer systems change.
Yates, however, considered it was worth it. He said: "There has been a shift in the paradigm. It's got much more client-focused. At first it is very costly, but in the long run it's about increasing the ease of daily business for your clients."
Neil Forrest, the general manager of Chase Manhattan Bank, said: "The pace of change in this industry is faster than ever before and I see no reason for that to slow down. Collectively, clients want everything, but individuals want customised solutions to meet their own individual needs."
He claimed that business at the moment was still primarily by mail and faxes, adding that he thought this was going to end fairly soon.
The internet should encourage the existence of pan-European funds. The European Union was broadly censured for its failure to facilitate European-wide distribution. If a fund gains Ucits certification, for example, it still must be cleared again for sale in every new country and must follow the different laws on advertising and prospectuses.
The opening-up of the market mentioned by Seale is happening despite difficult conditions on a continent where banks still reign supreme in most countries.
Italy is entirely dominated by banks, and around 85% of sales in France and Germany go through proprietary channels. The UK is by far the closest to the US model, with only 17% distribution through proprietary channels.
Eric Terme, managing director of Credit Lyonnais, said: "Selling abroad is very difficult if you don't have a large network behind you. Europe should be unified, but there are tax differences, different currencies, legal issues and cultural differences."
The future, according to most of the speakers, lay in accelerating online sales and the increasing popularity of fund 'supermarkets' - internet portals allowing access to funds from many different product providers. These supermarkets are often being set up by fund managers offering competitors' products.
Another suggestion to improve the quality of client relationships was made by a company that offers third-party call centres.
Call centres were first introduced as a way to provide investors with instant access to information on their accounts without the product providers incurring the enormous expense of setting up many regional offices.
Michel Bouari, director of pan-European Services for Transcom Europe, thought that value could be added to the call centre services by turning them into 'customer-relationship management' centres in order to maintain a more sophisticated relationship with every client.
His idea was that he would expand the role of the call centre from the traditional areas of transaction-only to more sophisticated financial advice and getting advanced customer feedback.
Bouari said: "The challenge facing the investment fund industry today is to deliver improved customer service. In a more and more competitive environment, all companies now recognise the vital importance of getting closer to customers during their whole life cycles, and not purely in sales si
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