Asset Management: Institutional Sales

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Asset Management: Institutional Sales

  1. 1. TM The Cerulli Report Release: Cerulli Asset Management: Associates Institutional Sales & Relationship Management The second “Client Retention and Cross Selling Drive the Economics of Cerulli ReportTM to focus on the investment the Institutional Business” consulting and institutional marketplaces, this report contains the This targeted study shows how asset managers are servicing different delivery channels following sections: within the institutional landscape. Firms focused on defined benefit mandates are pursuing • Institutional Framework opportunities in defined contribution, subadvisory, foundation, and endowment marketplaces. Meanwhile, they face competition from retail fund managers pursuing • Sales Teams separate accounts. This report also details how firms should best organize their marketing • Client Service Teams and sales personnel. Focus is on the role of sales, client service, consultant relations • Consultant Relations personnel, and best practices within these distinct business units. Teams • Other Personnel: the This report enables institutional asset managers, retail fund managers, and investment Rest of the Story consulting firms to: • Aligning Personnel with Overall Firm Goals • Examine factors changing the institutional marketplace • Evaluate efficiency of institutional sales and marketing divisions to optimize client service • Identify best practices in client service and segmentation • Understand how institutional portfolio managers, product managers, questionnaire and RFP teams, and marketing and communications groups are For sample text from best positioned this report, log on to our Website at • Recognize effective hiring practices, goal setting, and compensation structures www.cerulli.com. • Assess lead generation, prospecting, and cross-selling techniques Data and findings contained in this report were leveraged from two proprietary surveys delivered to institutional investment managers. The first survey examined organizational structure and best practices within the institutional marketplace. The second survey focused specifically on best practices in Related Cerulli Research: servicing institutional investment consultants. Investment Consultants: A Strategic Outlook Cerulli Quantitative Update: To order this report or for more information, log on to our Retirement Markets 2003 Website at www.cerulli.com or contact: Rachael Malatesta Thomas Marsh Asset Management: A Product 617-437-1098 x119 617-437-1098 x133 Strategy Framework rmalatesta@cerulli.com tmarsh@cerulli.com Faxable order form attached 575 Boylston Street, Boston, MA 02116 June 2004 617-437-0084 www.cerulli.com
  2. 2. t h e c e r u l l i r e p o r t™ ASSET MANAGEMENT: INSTITUTIONAL SALES & RELATIONSHIP MANAGEMENT Rachael Malatesta US+1 617-437-1098 x119 To Purchase This Report And ACCESS Service, Fill out form and Fax to 617-437-1268. 4 1 rmalatesta@cerulli.com Name: Thomas Marsh US+1 617-437-1098 x133 Company: tmarsh@cerulli.com Address: Phone: Email: ____ The Cerulli ReportTM ..............................................................................US$8,000 Asset Management: Institutional Sales & Relationship Management ____ Add Analyst Access* ..............................................................................US$4,000 *With The Cerulli ReportTM Analyst ACCESS Service, your organization can interact regularly with Cerulli’s analysts for additional research on topics related to this report. This service extends for one year from date of purchase and includes: • Discussion of strategic and tactical initiatives related to sales and relationship management in the institutional marketplace • Education on the industry dynamics • Interpretation of relevant industry events • Assistance in developing relevant industry presentations • Guidance assessing organizational structure of sales and relationship management functions 575 Boylston Street Boston, MA 02116 Phone: 617-437-0084 Fax: 617-437-1268 www.cerulli.com File: Web 06/04
  3. 3. TABLE OF CONTENTS INDEX OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 REPORT SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Beneficiaries of This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Report Roadmap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 KEY FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 INTRODUCTION: THE INSTITUTIONAL FRAMEWORK . . . . .16 The Institutional Marketplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 New Market Entrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Converging Defined Benefit and Defined Contribution Markets . . . . . .21 Assessing Market Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Intermediaries and Gatekeepers . . . . . . . . . . . . . . . . . . . . . . . . .24 Subadvising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Redefining the Building Blocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Institutional Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 SALES TEAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Size of the Sales Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Sales Strategies and Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 Lead Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Prospecting Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Finals Presentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 New Business Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Managing the Prospect/Client Transition . . . . . . . . . . . . . . . . . .45 Cross-Selling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 CLIENT SERVICE TEAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Functional Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Size of the Client Service Team . . . . . . . . . . . . . . . . . . . . . . . . .55 Client Scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 Account Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Business Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 Cost of Doing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Client Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Service Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Strategic Client Servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72 C A Asset Management: Institutional Sales & Relationship Management 1
  4. 4. Client Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 CONSULTANT RELATIONS TEAMS . . . . . . . . . . . . . . . . . . . . . . . .74 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Size of the Consultant Relations Team . . . . . . . . . . . . . . . . . . .77 Segmenting Consulting Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 Consultant Relations Service Components . . . . . . . . . . . . . . . . . . . . . . . .79 Consultant Relations Best Practices . . . . . . . . . . . . . . . . . . . . . .80 OTHER PERSONNEL: THE REST OF THE STORY . . . . . . . . . . .83 Institutional Portfolio Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83 Product Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86 Questionnaire & RFP Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86 ALIGNING PERSONNEL WITH OVERALL FIRM GOALS . . . .93 Hiring Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97 Sales Team Compensation Models . . . . . . . . . . . . . . . . . . . . . . .98 Client Service Team Compensation . . . . . . . . . . . . . . . . . . . . . .100 Consultant Relations Team Compensation . . . . . . . . . . . . . . . . .101 Organizational Transitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103 PROGNOSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104 GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106 INDEX OF COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107 2 Asset Management: Institutional Sales & Relationship Management C A
  5. 5. INDEX OF EXHIBITS INTRODUCTION: THE INSTITUTIONAL FRAMEWORK 1. The Evolution of the Client-Centric Model . . . . . . . . . . . . . . . . . . . . .18 2. Large Plan Sponsors With Both Defined Benefit and Defined Contribution Plans by AUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 3. Defined Benefit and Defined Contribution Sales Team Structure . . . .23 4. Defined Benefit and Defined Contribution Consultant Relations Team Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 5. Sources of Institutional Asset Flows . . . . . . . . . . . . . . . . . . . . . . . . . .25 6. Sources of Institutional Asset Flows by Institutional AUM . . . . . . . .26 7. Sources of New Mandates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 8. Cause of Manager Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 9. Determining Factors of Overall Organizational Framework . . . . . . . .30 10. Sample Structure for an Institutional Asset Manager . . . . . . . . . . . .31 11. Investment Manager Archetypes: Structural Characteristics by Institutional AUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 SALES TEAMS 12. Sales Framework Decision Process . . . . . . . . . . . . . . . . . . . . . . . . . .34 13. Investment Manager Archetypes: Sales Teams . . . . . . . . . . . . . . . . .36 14. Sales Team Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 15. Percentage of Firms With Channel-Specific Sales Representatives .38 16. Average Number of Sales Representatives And Assets Per Sales Representative by Institutional AUM . . . . . . . . . . . . . . . . . . . . . . . . .39 17. Average Number of New Accounts by Institutional AUM . . . . . . . .40 18. New Clients As Percentage of Total Clients by Institutional AUM .41 19. Institutional Sales Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 20. Number of Annual Prospecting Meetings by Institutional AUM . . .43 21. Number of Prospecting Meetings Per Salesperson by Institutional AUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 22. Conversion Rate of Prospecting Meetings by Institutional AUM . . .44 23. Percentage of Finals Presentations Resulting In A Win . . . . . . . . . .45 24. Cross-Selling Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 CLIENT SERVICE TEAMS 25. Duration of Client/Asset Manager Relationship . . . . . . . . . . . . . . . .49 26. Client Service Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 27. Percentage of Firms With Dedicated Client Service Teams . . . . . . .51 28. Client Service Team Organization . . . . . . . . . . . . . . . . . . . . . . . . . . .52 29. Investment Manager Archetypes: Client Service Teams . . . . . . . . . .53 30. Percentage of Client Service Teams That Process Fund Flows . . . . .54 C A Asset Management: Institutional Sales & Relationship Management 3
  6. 6. 31. Group Responsible for Client-Specific Questionnaires . . . . . . . . . . .54 32. Average Number of Client Service Representatives and Average AUM Per Client Service Representative . . . . . . . . . . . . . . . . . . . . . .55 33. Cerulli Client Scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 34. Percentage of Firms That Segment Clients For Servicing Purposes .59 35. Client Services Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62 36. Client Services: Offerings Versus Level of Effectiveness . . . . . . . . .62 37. Client Service Functions: Dos and Don’ts . . . . . . . . . . . . . . . . . . . . .63 38. Sample Segmentation and Services Offered . . . . . . . . . . . . . . . . . . .63 39. Average Number of Face-to-Face Meetings With Active Clients by Institutional AUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 40. Percentage of Asset Managers by Number of Face-to-Face Meetings With Active Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 41. Average Number of Face-to-Face Meetings Per Dedicated Client Service Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 42. Average Number of Face-to-Face Meetings With Active Clients Per Total Sales/Client Service Representative (Combined Role) . . . .66 43. Frequency of Client Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 44. Officer Typically Attending Annual Client Meeting . . . . . . . . . . . . .67 45. Frequency of Meetings With Portfolio Managers or Senior Investment Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 46. Process For Handling Portfolio Manager Requests . . . . . . . . . . . . . .68 47. Asset Point at which an Institutional Portfolio Manager Is Substituted in a Finals Presentation . . . . . . . . . . . . . . . . . . . . . . . . . .69 48. Frequency of Conference Calls With Clients and Investment Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 49. Methods Used to Communicate With Clients . . . . . . . . . . . . . . . . . .70 50. Members of Senior Management That Meet With Clients . . . . . . . .71 51. Frequency That Clients Meet With Senior Management . . . . . . . . . .71 CONSULTANT RELATIONS TEAMS 52. Percentage of Firms With a Dedicated Consultant Relations Team .75 53. Organization of Consultant Relations Team . . . . . . . . . . . . . . . . . . . .76 54. Investment Manager Archetypes: Consultant Relations Teams . . . . .77 55. Average Number of Consultant Relations Personnel by Institutional AUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 56. Criteria for Ranking Consulting Firms For Coverage . . . . . . . . . . . .79 57. Consultant Relations Functions: Dos and Don’ts . . . . . . . . . . . . . . . .81 OTHER PERSONNEL: THE REST OF THE STORY 58. Percentage of Firms With an Institutional Portfolio Manager Role .84 59. Number of Institutional Portfolio Managers by Institutional AUM .85 60. Organization of Institutional Portfolio Managers . . . . . . . . . . . . . . . .85 4 Asset Management: Institutional Sales & Relationship Management C A
  7. 7. 61. Percentage of Firms With a Product Manager Role . . . . . . . . . . . . . .86 62. Percentage of Firms With A Combined Questionnaire/RFP Group .87 63. Number of Questionnaires and RFPs Completed by Calendar Year .88 64. Significant Third-Party Database Providers . . . . . . . . . . . . . . . . . . . .89 65. Number of Completed RFPs by Calendar Year And Institutional AUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90 66. Average Number of People in Combined Questionnaire/RFP Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90 67. Organization of Questionnaire/RFP Teams . . . . . . . . . . . . . . . . . . . .91 68. Percentage of Completed RFPs Resulting in Selection as Finalist or Semifinalist by Calendar Year . . . . . . . . . . . . . . . . . . . . . . . . . . . .91 ALIGNING PERSONNEL WITH OVERALL FIRM GOALS 69. Aligning Personnel With Overall Firm Goals . . . . . . . . . . . . . . . . . .93 70. Sales Team Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99 71. Client Service Team Compensation . . . . . . . . . . . . . . . . . . . . . . . . . .101 72. Consultant Relations Team Compensation . . . . . . . . . . . . . . . . . . . . .102 C A Asset Management: Institutional Sales & Relationship Management 5
  8. 8. METHODOLOGY This Cerulli Report, Asset Management: Institutional Sales & Relationship Management, explores how asset management firms are servicing increasingly different delivery channels within the institutional marketplace. Firms traditionally focusing on defined benefit mandates now hope to address emerging opportunities in defined contribution, subadvisory, foundation, and endowment marketplaces. They face increasing competition from retail fund managers seeking to offer their capabilities through separate accounts. This report explores how firms should organize their marketing and sales personnel to best tap these new opportunities. Particular attention is paid to the role of sales, client service, and consultant relations personnel, as well as best practices within these distinct business units. The quantitative component of this report is based on two separate Cerulli Associates proprietary online surveys. We use our survey information to complement secondary research and to gain a full perspective on industry trends. The first survey targeted institutional investment managers and examined best practices for sales and relationship management within the marketplace. The second survey, which also targeted institutional fund managers, focused specifically on best practices in servicing institutional investment consultants. CA also uses third-party information attributed to publicly available sources and proprietary information. Our qualitative analysis is made possible through the cooperation of more than 20 industry executives with diverse disciplines within institutional investment management marketing and sales organizations. CA analysts conduct interviews for background purposes only and protect the anonymity of our sources. Our qualitative analyses also rely on our own market insight as well as perspectives from various proprietary and third-party information sources. 6 Asset Management: Institutional Sales & Relationship Management C A
  9. 9. REPORT SCOPE Beneficiaries of This Report Strategies outlined in this report should assist three types of clients: • Institutional asset managers seeking advice regarding the optimal orga- nizational structures for their sales, client servicing, and consultant relations groups. • Retail fund managers assessing market entry or expansion strategies for the institutional asset management segment. • Investment consulting firms seeking intelligence regarding the consultant relations support infrastructures evolving among investment management firms. Report Roadmap Asset Management: Institutional Sales & Relationship Management has six sections: • The Institutional Framework examines the forces affecting change in the institutional marketplace. A competitive business environment is presenting asset managers with new market opportunities, prompting managers to reassess their competitive positioning and adjust their internal organizational structures. • The next section, Sales Teams, discusses organizational structures, headcount, strategies, and best practices. We explain how the traditional sales role is changing, and the impact such evolution will have on overall business practices. C A Asset Management: Institutional Sales & Relationship Management 7
  10. 10. • Client Service Teams reviews the evolving role of the client service officer. We review how asset managers are structuring their client service efforts and organizing their teams, particularly focusing on issues related to headcount. We also examine client service initiatives, including the segmentation process, as well as the various services such teams offer. • Consultant Relations Teams analyzes the institutional market’s increased emphasis on the role of investment consultants, and how that impacts the asset managers servicing them. Again, we look at the structure of the consultant relations team, its organization, and the best practices needed to succeed. This section complements a recent installment of The Cerulli Report series, Investment Consultants: A Strategic Outlook. • Other Personnel: The Rest of the Story reviews the other roles important for successfully selling and marketing in the institutional marketplace. We review the structure and organization of roles such as institutional portfolio managers, product managers, questionnaire and RFP teams, marketing, and communications. • Aligning Personnel with Overall Firm Goals examines human resource issues, including hiring practices and compensation structures. We review processes through which a manager can implement changes in structure and redefine roles by realigning the factors that motivate staff. 8 Asset Management: Institutional Sales & Relationship Management C A

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