Rebooting the global asset management industry

42 Rebooting the global asset management industry From a Product-Centric to a Client-Centric Approach The prevailing culture of product push by asset managers is giving way to one of client centricity, as they realign around clients to strengthen brand loyalty and improve distribution capabilities. Taking them in turn, if the great wealth transfer is to deliver on its promise, asset managers have to go from being distant vendors to trusted advisors (66%), as shown in Figure 4.1, upper panel. It is someone who is in the client’s inner circle of confidants and offers impartial proactive investment ideas, research outputs and client education (63%). These attributes are seen as an essential part of client experience alongside personalized digital tools. Retail assets have long been seen as risky cyclical panicky money that piles in late and vanishes when the mood sours. With low financial literacy, many retail investors suffer from behavioral biases that make them act in ways contrary to their best interests (see Insights on the next page). In contrast, the democratization of private markets requires investors to have longstanding experience over multiple market cycles. To override this problem, asset managers are seeking to build tech- enabled solutions that foster outcome-driven partnerships and greater alignment of interests. On the financial side, alignment means adopting a meritocratic incentive structure with full transparency around it (60%), and co-investing with clients so as to have an equitable sharing of pain and gain by having skin in the game (52%). On the non-financial side, alignment means shifting the focus of product innovation from quantity that might create product churn to quality that delivers what it says on the tin (47%). It also means avoiding copycat products and providing only those that meet client needs (45%). Above all, it means doing regular pulse surveys that solicit new ideas to know client’s risk tolerances, manage their expectations and identify areas for improvement (42%). Without greater client engagement, hopes will always run ahead of reality. With 24-hour news cycles, correlated mistakes from herding have invariably cost clients dear. Retail assets have long been seen as risky cyclical panicky money that piles in late and vanishes when the mood sours. Figure 4.1 What will be the most distinctive features of your business model over the next three years? Source: Citi/CREATE-Research Survey 2025 Alignment of interest % of respondents Distribution capabilities Cultivate the role of a trusted advisor Deliver proactive investment ideasandclient education Adopt meritocratic fee structures Create in-house client protection panels Co-investingwithclients to improve interest alignment Shifting the focusof innovation fromquantity toquality Providing fit-for-purpose products, not copycat ones Doing regular clientpulsesurveysandseekengagement Partneringwith topdistributors andasset gatherers Provide predictive analytics to clients Having proprietary D2C platforms Providing chatroom facilities in real time 66 63 60 55 52 47 45 42 60 51 49 17 “Transparency in fees and services is a key differentiator for us. We don’t have layers of hidden charges in any jurisdiction.” “Client experience will become a key value proposition, a key point of competition and a key area of change.” Interview Quotes