Tue, 29/11/2016 - 13:22
Meaningful conversations create value. With the proliferation of information sharing and communications platforms, ranging from Vine and Instagram to Snapchat, Dropbox, Pinterest and, of course, Twitter, individuals and businesses (think fashion houses, advertising agencies, media organisations) have many ways to connect and interact across the globe.
As the Internet of Things continues to evolve, more and more people are using mobile devices. There are nine billion connected devices today. That number is expected to rise to 30 billion by 2022. When Twitter burst on to the scene 10 years ago, it ushered in a unique way to communicate in short clipped messages to the world at large. One only has to see the way Mr. Trump used Twitter to devastating effect to win the US Presidential Election, doing away completely with old media: TV adverts and the like.
The concept of Twitterisation, in this sense, is for asset management groups to think about how to communicate more effectively with their investors. How they can forge stronger alliances and encourage collaboration. And in doing so, refine the way that they manage, and develop, their fund products.
“As opposed to building a product in a think-tank silo and saying, ‘Here consumer, take it’, asset managers might want to think, ‘We’re going to talk to you, consumer, and we’re going to create a product based on our conversations that we think makes sense to all our consumers’. It’s no longer a diatribe, it’s a dialogue; one that helps to build a community. That’s why you see things like crowdsourcing and gamification becoming more popular today,” says Ross Ellis (pictured), Vice President and Managing Director of the Knowledge partnership in the Investment Manager Services division at SEI.
To some extent it looks like asset managers are moving with the times, particularly in Europe. According to a new survey by PwC (https://www.pwc.lu/en/asset-management/docs/pwc-asset-management-in-the-social-era-june16.pdf) the share of asset managers on social media today is 89% (73% excluding LinkedIn). Moreover, 10 of the top 25 users of social media are European players.
Those that embrace new media to become more interactive have the opportunity to connect on a more personal level with their investors. This can be especially important for large, often anonymous, institutions for whom humanising themselves is inherently more difficult, as it shows they are listening to their clients and incorporating their feedback.
By taking customers’ feedback and suggestions on board, businesses can incorporate the input and share the changes they make to products and services etc., and in doing so strengthen the customer relationship. It becomes a virtuous circle.
When it comes to responding to digital technology and improving the client communication process, it would appear that wealth management groups, in particular, still have a long way to go. As highlighted in another PwC report (https://www.pwc.com/sg/en/publications/assets/wealth-20-sink-or-swim-gx.pdf), even though some 69 per cent of HNW individuals use online banking, only 25 per cent of wealth managers offer alternative digital channels to email.
This shows that in some sections of the asset management industry, there is still a big disconnect and a degree of inertia.
“The people who are consuming wealth management products are giving their feedback yet the wealth managers – or whoever the business entity is – are not responding in kind. I think a lot of the reason for why it may not be happening is because firms want to control the message so tightly that they don’t necessarily want customers to criticize them or discuss things off-topic. Not surprisingly, they prefer to be in a position where their communications have been blessed by legal and compliance, and they aren’t going to fall foul of the SEC or the FCA,” suggests Ellis.
Portfolio managers who use Twitter are discovering that it can be an effective tool to share market views and insights that relate indirectly to their fund strategy, without talking directly about fund performance, which could leave them open to regulatory risk. Used smartly, communication channels are a way to underscore the value of the fund strategy and for portfolio managers to better understand their clients.
To do this, however, asset managers must be willing to put their neck on the line and embrace criticism, process it, and respond accordingly. This is important given the concerns today that too many people are living their lives in filter bubbles; the Facebook generation that only see and read things that they agree with and fits their world view.
Asset managers are in some sense a victim of this. Those that break the shackles and invite investors to criticize and question will be kept on their toes. That has to be a welcome development. Especially as the SEC and FINRA are becoming more open towards social media and appreciative that social media channels can help to educate investors.
“Simply pushing out numbers does nothing for you (or your investors),” says Ellis. “Unless you can turn it into a story, to use the data and illustrate why it makes sense and is relevant to the investor, then they may interpret it in a way that you didn’t want them to interpret it. You have to have the right mindset to opening up a more meaningful two-way dialogue with investors.
“This can extend to blogs as well. If a fund manager runs a blog, they have to be willing to accept that people will make negative remarks, but either way they must also respond to any comments posted as quickly as possible; within hours. Now, does a portfolio manager or an analyst have time to constantly look at the blog for comments and think about what they are going to say, and in such a way that doesn’t involve getting into trouble with the SEC? That requires infrastructure. And if you’re not going to do it well, don’t do it at all.”
One of the other major benefits of closer, tailored communication is more effective reporting. As SEI’s Upside of Disruption report has repeatedly shown, technology gives asset managers vast amounts of information on their investors. Going forward, asset managers could potentially develop a persona for every client, and craft communications specifically for them; for example, if a major macro event causes the oil price to climb 20%, how will that affect your particular portfolio.
This would vastly improve the customer experience. Investors would be left thinking the fund manager really does have their best interests at heart because they are communicating information that is personal to them and not generic.
“Fund managers could make the whole experience more sociable, more open, and develop a platform where ideas and opinions are openly shared and communicated,” says Ellis, who continues:
“In the end, it is all about customer experience and making investors feel like they belong. Data scientists can interrogate data and build insights to understand what makes investors tick, but social media scientists are able to talk about those insights from an emotional standpoint. It’s about communicating in a way that demonstrates you know what the investor is thinking and feeling, as opposed to just telling a generic story about the data.”
In other words, it’s a softer, more empathetic approach. It’s also a shift in mindset, thinking more externally about how people want to share and interact.
Instead of getting a quarterly factsheet from the manager, imagine getting a custom conversation that is written personal to you, and not to all investors in the fund. It builds trust at the end of the day, and that is a precious commodity in the funds industry.
To read each of the five chapters or SEI’s paper in full, please click on the following link: www.seic.com/DisruptToday
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