A fragmented economic recovery and continued global market volatility are influencing investors to become increasingly goal-oriented, seek more value from their investments and closely examine costs related to investment products and advisory services. New "customer lifecycle" pricing models are now popular to help move clients to greater loyalty. Impending regulations, such as Retail Distribution Review also demand greater transparency on charges asset managers include on client statements.
All of these forces challenge asset managers to offer flexible pricing arrangements, efficiently accommodate varying fee structures and provide transparency in billing to their clients.
Adding to their billing challenges is a new focus by firms to more tightly manage their revenue to better offset expenses and accelerate growth. These challenges, while related, are often supported by disparate technology systems or manual billing and revenue management processes. It's clear today's environment dictates that asset managers have an integrated, automated approach for customer billing and revenue management.
Do More With Less
As asset managers introduce new products and services in response to the cost-conscious investor and accommodate "customer lifecycle" pricing, a key consideration is the ability to manage new and different fee structures, while ensuring accurate billing. One automated system will allow firms to support each of these varied billing objectives, to do more with less.
Bundle Products For A Holistic Offering
As regulatory constraints challenge institutional growth, firms must begin bundling their investment products to provide their customers with a holistic offering. In the past, each investment product or service was priced individually and customers were willing to accept separate charges because there was no other option. This is no longer the case. Today, investors want to see all of their products and services in one place, not to mention the common expectation of incremental benefits they might reap from placing additional business with the asset manager or firm.
The market has changed and so too has investor behavior. There is great benefit to firms that invest in technology in order to see total potential revenue for each investor's complete relationship, rather than just at a product level. Quite often, an asset manager will be asked by a client to provide a tailored schedule in order to provide investors with the transparency they require. These requests become more frequent as investors expand their financial portfolios and move away from an off-the-shelf product approach, diversifying their portfolios through the adoption of new products. Standard pricing cannot accommodate this level of customization, and therefore revenue management becomes more difficult for firms without flexible automated billing and revenue systems.
Invest In An Integrated System
Asset managers must ensure that their customer billing and revenue management solutions are able to handle the complexity of existing arrangements, while allowing for the required changes in advisor charging. The solution needs to provide the clarity and transparency that allows investors to understand exactly what the advice is costing them, and why. Asset managers that do not have a flexible customer billing and revenue management solution will see internal costs skyrocket in order to meet changing client and regulatory demands. The operational challenges that result from overcoming technology limitations will detract focus from customer relationships and inhibit growth.
To overcome these challenges, asset managers need to create processes that allow for customization and variety in fees and revenue management. Insight into an investor's complete portfolio is the key to offering superior customer service and prioritizing goals according to business needs. A timely investment in flexible and automated technology allows financial institutions to stay ahead of the curve and manage variations in their billing schedules without incurring additional costs from attempting to do so manually. The investment in automation also allows firms to evaluate current pricing strategies, new pricing models, adjustments in scheduling and future pricing plans. When product pricing and service offerings are not coordinated, an automated revenue solution can facilitate the addition of new pricing structures quickly, so firms remain competitive and nimble.
Flexible customer billing and revenue management solutions also enable financial institutions to reward customers with discounted pricing as they take on more products and services. This helps to expand the relationship with the customer and ensure the investor remains with the firm for the long term.
Position Your Firm For Growth
To drive efficient operations, asset management firms need to move away from manual processes and reduce the number of disparate systems that perform the same tasks. Centralizing and automating revenue management can help firms cut costs and reduce risk while enabling customer lifecycle pricing and improvements in pricing strategy.
Operationally, organizations will need to discover how to build a charging structure that supports business growth plans, while being fair and clear in relation to the service provided. Ideally, the revenue structure should not just track fees based upon assets under management (AUM) and fixed charges, but also give firms the ability to leverage actual results to develop forecasts and growth plans.
Smart Billing Enhances Investor Trust
Inefficient billing impacts the predictability of revenue for asset managers and, more importantly, leaves clients wondering if the charges they are being asked to pay are justified and fair. The smart route to ensure that revenue predictions are plausible is to start with accurate customer management and billing. There is good news: this path has been traveled before and is easy to navigate. By leveraging technology that is timely and dependable, firms can enhance their operations and reestablish client trust.
Centralized technology will help investment managers respond to investors' demands for transparency, while simultaneously increasing revenue assurance by preventing billing calculation errors.
Achieve Efficient And Transparent Revenue Management
Now that an array of investment choices are available, standard and stale product offerings don't appeal as much to new savvy investors. Furthermore, investors now expect a more personalized service – asset managers cannot stay competitive with a one-size-fits-all approach. The ability to offer innovative products and individualized advice is central to attracting and retaining clients, and the ability to properly evaluate diverse portfolios is a prerequisite to maximizing revenue.
From both the investor and investment firm's perspective, the only sustainable model is one in which automated processes facilitate product diversity and operational efficiency. By investing in an integrated billing and revenue management solution that streamlines middle and back-office processes, firms will achieve the flexibility, configurability, accuracy, transparency and timeliness required to excel. In an environment of high demand for services, the opportunity to not only retain clients but also differentiate offerings and grow revenue may never be better for firms that invest in the technology that will bring high impact to the client relationship.
About The Author:
Mike Foster is general manager of the institutional management business, Investment Services, Fiserv. With over 20 years of experience designing and implementing applications for retail and institutional financial institutions, Foster has served in various leadership roles across start-up, growth, and Fortune 500 firms. Foster joined Fiserv in 2008 to lead Global Client Services for Investment Services' Institutional Software business, focused on middle and back-office solutions for tier 1 & 2 investment managers. Prior to Fiserv, he co-founded Incurrent Solutions, Inc. a ‘software as a service' provider which grew to be the leading outsourced customer self-service and e-commerce platform in the payment card industry.