Posts Tagged ‘relationship management’

Client-centric Financial Metrics (Capability #3)

The CFO’s office, being responsible for all financial reporting in any firm, are the seemingly logical choice as owners of client-level reporting given their access and understanding of the data, technical expertise in financial reporting, and broad understanding of the overall flows of the firm. Regardless, Client Management should play a key role in the definition and structuring of client-level analysis and reporting, for one key reason: a traditional financial management function often has competing (and sometimes conflicting) mandates regarding how they report financial results. We’ve seen instances where legal entity or divisional reporting take precedence over client-oriented reporting that often creates distortions on how an account is reported so it’s hard to see its true performance and who within the organization is responsible for variances.

Client ReportingTake the example of a global client that does business in multiple geographies and across multiple products. Each regional manager and each product manager, working with their respective finance heads, will vie to earmark as much revenue for their division as possible, creating double-counting of revenues and confusing results for a given client. The Client Management team should be tasked with unraveling these knots to provide a clear, holistic picture of an account.[more…] They should also identify what information needs to be delivered within Sales and Sales Management to ensure the right strategic decisions and focus.

In some cases we’ve seen Client Management take full ownership of client-level financial reporting, while in others we’ve seen a close collaboration between CFO and Client Management. Regardless, the Client Management team should have a strong global mandate and management support to oversee or co-manage this process.

Like any financial analysis and reporting function, client reporting involves establishing target budgets, reporting account revenue periodically, looking at trends, and flagging outliers that should be raised and discussed. Additionally, client-specific KPIs (key performance indicators) that help better understand client behavior and assess the quality of business flowing in should also be identified and tracked. Examples include volume and order size, movements versus peers, pricing changes, and changes in wallet size and market share. Client profitability analysis, which involves applying costs against client revenues, is probably one of the most useful, if not most complex, analysis to implement.

Identifying meaningful client segments and creating statistics around those also helps in identifying trends and uncovering opportunities. A strong Client Management team is usually adept at understanding the marketplace to best categorize the account base in useful groups. In many cases, the obvious segments may not necessarily be the best groups to track. The distinction between hedge funds and traditional asset managers, for example, is becoming blurred so tracking these is becoming less meaningful. Segments based on investment style, investment markets, or even firm “personality” may prove more useful for aligning resources.

By aligning client financial analysis and reporting with a strong Client Management function, a firm will set itself up to better manage their account base from a client-centric perspective and help realize the value of a clear client strategy.

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Service Tracking (Capability #2)

Once a client strategy has been designed and kicked off, the real work of implementation begins. Relationship managers, salespeople, and all other client facing professionals now have to engage clients with a new purpose. But how do managers know whether the team is executing based on the new plan and gauge whether the new program is having a meaningful impact on clients? The Client Management function should be able to track and monitor service activity. In many ways this is perceived as a painful thing to do, with many client professionals feeling as if there is additional scrutiny on their work with “big brother” makings. Many managers also feel that instituting policies and technologies aimed at monitoring their staff’s work will alienate them from their team and create a breach of trust.

FeebackThe key to success of the strategy is for Client Management to frame service tracking as a productivity tool that will help client-facing teams use information to enhance their interactions with clients.[more…] There is a huge distinction between systems that capture client interactions for the purpose of management oversight and systems that capture data which then feeds insights back to salespeople to make their jobs easier and more productive. I would argue that without a feed-back flow of information, salespeople will completely distrust the system and find ways to game it, or be completely resistant to adoption. The most talented individuals with the best client relationships will probably be the first to push back because they know they have leverage over the organization.

Activities that should be tracked include phone calls, meetings, and emails. Important documents, like contracts and pricing sheets, should also be stored in the same location as other client data so that client-facing individuals have a single repository of critical client information (to the degree that’s sensible and minimizes risks of information leakage from the company, of course). Any notes or client color should also be documented and logged into the system. Call reports should be required to be written and logged following any important client meetings or calls. There is always a lot of resistance to institutionalizing this, but what we have found is a lot of this is already being done, mostly through emails, but these are not being captured in a system that allows for information tracking and sharing.

What’s incredible to see is that once the ball gets rolling and salespeople start using the information collected, productivity shoots up and everyone becomes dependent on the data. Managers will benefit from this virtuous pattern by having robust client service tracking that, when reviewed in aggregate on a periodic basis, brings the client strategy to life.

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Five Critical Success Factors for Managers Considering a CRM System

Implementations of CRM, or Customer Relationship Management, systems are notorious for failing to achieve their promise. If you’re considering either implementing your CRM system or upgrading your existing CRM system, here are some guidelines to follow to make sure that you have the most successful implementation.

– Front-line participation: There should be significant participation from front-line business managers from the very start of the project. The most successful CRM implementation that I’ve seen actually had full project leadership coming from front office management, with IT working as subject matter experts and project managers. This isn’t saying that IT managers wouldn’t have the right project leadership skills. CRM systems are probably some of the most idiosyncratic and nuanced technologies that require constant input from a very reluctant user base: salespeople. To get the right requirements that will ensure adoption, there has to be a perception that ownership is within the business, not in IT.[more…]

Culture of information sharing: The right culture of information sharing needs to be in place (within compliance guidelines of course). This is much easier said than done, and for many organizations not very practical. But in organizations where management realizes that bringing together disparate pieces of client information held by salespeople can reveal new opportunities, an effort to change the culture is the best strategy. I’ll detail examples of this in a future post.

Usability: “Usability” is a term used by IT professionals that is often not tangible to non-tech types. In my view, there are two aspects of usability which apply to CRM. The first is intuitiveness, which should be measured by the amount of training needed to get to full use. Less training equals more intuitiveness. The second is workflow integration, which means how well the tools can be integrated into the existing workflow of the user, e.g., adding content to a client record (meeting notes, emails, documents) by simple clicks in email. This area requires the most creativity and expertise to get right. As web and mobile applications become more sophisticated, the expectations of users also increase at a rapid pace.

Data accuracy/integrity: All data-driven systems are only as good as the data within them. CRM data can get corrupted remarkably fast because the source of its key data are from the users, not from a central source. This is a key difference versus other kinds of systems. A lot of thought, and a great deal of expertise, need to be put to bear around this question to achieve a success.

Information integration: I’ve found that CRM information, as useful as it can be to understand a client, when integrated with other systems and data produces incredible insights. Integrating, for instance stock interest information garnered by the sales team with stock and fund performance information can create an interesting product profile that can be actionable. Thinking about how you will maximize the use of your CRM information at the planning stages of implementation creates intense value down the road. Three big questions emerge that change how the system is built and used:

  1. What creative ways can we organize and analyze the data to provide new insights? Your organization probably already captures enough client information to create a competitive advantage, but is not leveraging today.
  2. What sources of information can we find that, when combined with CRM information, provide unique insights?
  3. What other information should client-facing personnel ask for from clients to match with other data sources?
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Can Institutional Equity Sales Be Transformed?

Institutional Equity Sales had been going through an existential crisis since 2003, starting around the time of the Eliot Spitzer rulings. The once noble profession became tainted with suspicions of fraud and conspiracy.  Since then the role has been systematically attacked from several fronts:

– a precipitous drop in commission rates paid by clients leading to drop in margins (and ultimately compensation)

– significant cynicism around the research product they are tasked to sell

– financial crisis at the banks that employ them, which has also led to…

– …instability and irrationality in the markets, making it difficult to provide rational, money-making advice to clients

– drop in the aggregate number of new deals coming to market, which is where a strong distribution platform proves its value [more…]

Within some banks, there have been discussions on whether to exit this area all together, if not strategically pull-back from non-core markets. Salespeople sitting in those seats are nervous, which is not unreasonable given the long-term prospects of the role. Language coming from the executive floors speak of drastic cuts across all Sales & Trading floors, with an emphasis on producers who can’t be easily aligned to a certain threshold of revenue. This is especially concerning to Equity Sales since the commission their clients pay is a bundled payment covering a whole host of services that make it difficult to isolate their contribution.

So is there long-term value in the Equity sales model? I would argue yes, but for the model to have long-term viability, organizations need to think differently about that role and how it can add additional value to clients. They also need to change some key business processes to enhance the impact that salespeople provide across the platform.

Better capture of client interactions

If salespeople had better information about all the interactions that their clients have had across their business and across time, they would be able to create a much more productive relationship. In speaking with many buy-side professionals, it’s clear that one of their top criticisms is lack of continuity and consistency from their counterparties. Through a robust CRM platform that features easy capture of client interactions, capture of research consumption data, and to easily log in notes, the coverage team will easily see client behavior over time and spot opportunities to better the relationship.

There are many CRM vendors in the market and for most people finding the right solution can be overwhelming. When first investigating the options, one is faced with endless possibilities, but also boundless risk. From a quick survey, there are at least 25 enterprise-ready vendors, with about as many upstarts to choose from. Also, CRM implementation projects have a horrid reputation of easily failing. In capital markets businesses, the risk is even higher because of the specialized workflow, compliance, and end-user data needs. Picking the right solution is critical, which I’ll be covered on a future posting.

Institutional Equity salespeople are probably the best positioned to take advantage of these systems and the data that they capture. They have been an integral part of their jobs and most salespeople have faced the challenges of sub-optimal systems.

Integrate with other client activity and client relevant information

IT spending at most broker-dealers has been historically concentrated on the development and optimization of trading technology in order to increase trading profits, to the detriment of the sales side of the business. With the 2008 financial crisis and subsequent reorientation to the client, there has been some shift of investment to Sales IT. There is now a desire to integrate other information into a client profile in order to have a more holistic view of the account to salespeople, including security holdings, fund performance, transaction trends from other asset classes (FX for instance), and client interest-driven information such as stock trends and twitter feeds. The more information that can be integrated into a client’s profile, the better the salesperson can provide guidance to the client. This can be a big differentiator.

The mechanics of integrating this information and rendering it in a useful fashion to salespeople is a complicated proposition, one which falls under the umbrella of the newest management buzz-term “Big Data”. There is a tendency by sales managers to avoid this complexity, but the advantage that we have today is that the cost of gaining a competitively advantageous insight though data has fallen dramatically. Although more discussion on specific strategies and considerations will be addressed in another post, it’s worth taking some time to look at applications like Qlikview, Tableau, and Spotfire to get a flavor of what they can easily do with data. Institutional Salespeople serving as the pivot point of all this information could make them immensely valuable. Of all the people in this role that I’ve spoken to, the one key complaint they all have is that they feel they are constantly chasing information from multiple sources and that they miss a lot of information that can make them more successful. This can be efficiently delivered to them so that they can spend more time with their clients.

Position this role as relationship manager for key accounts, even beyond Equities

The Institutional Equity Sales role is unique relative to other roles in Sales & Trading in that their responsibility goes way beyond executing transactions. Salaried salespeople at many large firms have little involvement with client trades at all. Their core competency is in providing access and insights from across their platforms. Their role and responsibilities should be expanded to provide insight and access across all asset classes. They should be at the center of many of the relationships, especially with clients who are not product specialized, such as macro and event-driven hedge funds.

Buy-side clients constantly say that they want to have salespeople who “think like portfolio managers”.  Institutional Equity Salespeople are the best positioned of anyone in Sales & Trading organizations to evolve into broader experts that can provide clients with innovative solutions. The key is to make sure to provide them with the best tools and information so they can execute the broader mandate.

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