Yves Ceschenaux and Christophe Wintgens explore the lastest distribution trend, Customer Channel Management
The European funds market stretches from Sweden to Portugal, from Greece to the UK, with millions of private and institutional investors participating in over 30,000 European investment funds standing for almost E3,500bn.
The potential for growth is enormous. Even though the USA has half the population of Europe, the net assets invested in investment funds are almost double, over E7,000bn. Does this mean that the European market will grow by 400% over the next few years? Most people will say 'no', since the general view is that Americans are born investors and have a well-developed financial culture. Therefore, we cannot extrapolate the same situation as in the US.
However, it is debatable whether the US model can be applied to Europe. The 'securities' culture is becoming more common in Europe as well, with millions of potential investors changing their behaviour. Concurrently, asset managers are changing too, developing strategic partnerships in order to access Europe-wide distribution networks to sell products and increase assets under management. In fact, the European model is very similar to the US model. In the industry, behaviours adapt quickly to change, whether at the beginning or at the end of the value chain. The European asset management market has a huge potential, especially due to technology.
Customer Channel Management (CCM), a well-defined approach which includes traditional and new channels, covers the latest trends as far as distribution is concerned. Promoters and asset managers need to know their clients in order to offer them tailor-made products and services. To achieve their goal, they use their own distribution networks, develop partnerships with large groups or sub-contract distribution to third parties. The major issue is always the same: to sell products and services that are suitable for increasingly diverse, more sophisticated clients, in ever-widening jurisdictions where tax, legal and regulation requirements are different.
In order to better structure products and services offered to millions of investors, promoters and distributors need technological platforms to support them in defining, segmenting and following up the demands of their clients and prospects. Even though these platforms are essential to managing clients actively, they are not sufficient in themselves. They have to be integrated in an overall solution, CCM, which is a fully-fledged approach or 'philosophy' based on the following concepts:
•Focus on the client and identify his real needs.
l•Integrate client prospecting in the organisation's operational process.
Use technology to develop information systems directed towards the client.
•Optimise integrated processing channels in the front, middle, and back offices.
Tailor offers via one-to-one marketing.
•Develop a pro-active approach in responding to client needs.
•Gather as complete information on the client as possible.
•Develop close contact with the client or prospect.
In future, most organisations in all industry sectors will use this approach, on all levels: strategy, processes, human resources and technology.
Since Luxembourg is a central administration centre for funds, it is very likely to position itself as the main European platform for CCM. In recent years, a growing number of conferences have dealt with the distribution of financial products. Some of them have even taken examples of techniques used in Luxembourg. Recent trends show that retail distribution is getting more focus from the industry. Besides the technical issues raised by the volume of business generated by the B2C approach, other factors need to be considered for streamlining distribution. These are processing client information, including profiling and determining the client's risk threshold.
Managing the customer channels is an essential part of the problem raised by the pan-European distribution of investment funds. Due to the evolution of the investors' behaviour, their high sophistication, and their demands for very personalised products and services, CCM is not an option any more, but a necessity. The development of CCM relies on a strategy which is aimed at creating a privileged contact in the distribution value chain of financial products, between the asset managers and the investors. However, B2B remains the most common approach and it will continue to grow when the pension funds market explodes in Europe.
One of the most commonly used CCM channels in Europe, is the call centre, where the client can communicate with an agent who speaks his own language and is able to provide specific information quickly. For instance, the client gets added-value information that will influence his decision to buy or sell stakes in a fund. Moreover, the questions asked are stocked in an intelligent database, helping the asset manager to define the profiles of his clients more precisely, which allows him to adapt his products. The other channels are diverse and could involve face-to-face contact, such as agent networks, or virtual ones such as the internet. All these channels serve to process the information that is sent via them.
Investment funds professionals that wish to develop the asset manager/client relationship, are already, or soon will be, using CCM. If one keeps in mind that a large part of the asset manager's commission is paid back to the intermediaries who bring in the clients and all client-related information, it is worthwhile to change the current process and develop the technological platforms that will optimise the ratio of cost/added-value for the investors.
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