There is increasing overlap between wholesale and institutional clients and sales and distribution teams need to be structured to reflect this. The ways in which asset managers categorise clients is evolving. There is no one clear answer, but increasingly, it depends on the complexity of their needs and overall revenue, scale
- Clients are increasingly defining themselves as institutional, this might be because their needs are becoming more sophisticated or complex, or because they believe it changes the way they are serviced.
- Client behaviours vary depending on type of client (e.g. insurance, pension fund, wealth manager), however it is extremely difficult to segment clients based on behaviours.
- Sales and distribution teams need a wide range of skills to build deep relationships with clients and service their needs. Bringing previously segmented teams together could potentially require investment in upskilling.
The roundtable discussion opened with a brief outline of how traditional and institutional clients can be categorised with examples of how clients with these labels aren’t necessarily behaving in the way that they traditionally have. Sales and distribution teams do not always keep up with these changing behaviours. Institutional and retail are similar in AUM scale, however patterns vary, for example since Q1 2017 retail/wholesale flows have consistently outweighed those of institutional investors. But there is a case to be made that perhaps institutional money is ‘stickier’.
The average size of a defined contribution pension scheme is £2m. Although this would be considered an institutional client, in terms of size alone, this is traditionally more on the retail/wholesale side. In comparison, a private bank might have £20-30bn of assets and be a sizeable user of third-party asset managers and could therefore be considered as an institutional client.
Insurance companies tend to have particularly complex needs, whereas pension funds might have less multifaceted investment needs, but more demanding reporting needs. However, regardless of client type, clients are asking the same questions around process, transparency and portfolio construction.
Distribution and client servicing teams must adapt to change, as the market becomes more dynamic - teams within teams is not hugely beneficial to clients or asset managers. Teams which are large enough in size with a shared culture and common interest are the future. Servicing clients based on revenue generated can lead to a difference in servicing. For example, a digital servicing model can be more appropriate for lower revenue generating clients. There is a danger however that asset managers put a new digital interface on top of outdated infrastructure which leads to poor outcomes.
- It is advisable to segment clients by size as categorisation by client type is outdated.
- Sales and distribution teams need to be equipped to service wholesale and institutional clients - upskilling and communication are key. The language for wholesale and institutional clients is interchangeable and the focus should be how each audience wants to engage (channel).
- Clients want lower fees, fewer providers and deeper relationships.