The Investor Expectation Conundrum
Most mutual fund companies and 401(k) providers have historically relied on the industry’s cadre of brokers and financial planners to sell their products. And wisely so: we know that investors’ use of financial expertise and personal advice is increasing, not decreasing. The Investment Company Institute estimates that nearly 80% of all mutual funds are sold through an intermediary.
But today’s investment and economic climate are changing things — asset retention is a problem for many financial services companies, and generating new sales has become much more of a challenge.
A key contributing factor to this problem, we believe, is the breakdown of the communication continuum from investor to financial intermediary to financial services firm.
Most product manufacturers are quite adept at sending information out through the wholesaler channel, but few have “cracked the code” on creating a continuous communication and client service loop that serves investors and financial intermediaries equally well. As a result, financial services providers are not in a position to work collaboratively with investors to establish expectations about how investment products will perform and behave over time. Inevitably, when investors set their own expectations, they may experience disappointment and take their money elsewhere.
To solve this problem, all of the participants in the sales process — investment managers, wholesalers, financial intermediaries and investors — must reconnect at a fundamental level and begin to communicate and interact differently and more effectively.
Financial services firms and fund companies must:
- Identify investors’ expectations for the specific investment products they have purchased and are considering buying
- Create product stories that are flexible and durable enough to accommodate the multi-step communication and sales process (remember the game of telephone we played as kids?)
- Engineer feedback loops that incorporate investor expectations of the products and services they buy and use from financial services firms
- Equip wholesalers and financial intermediaries with the skills and tools they need to effectively manage investor expectations during the sales process and over time
At the same time, it is clear that financial intermediaries need access to products that solve real problems for their clients. Product manufacturers need to develop and manage products that resonate with investors, and that offer built-in sales stories. And all of the players need to work together to create strategies and tools for managing and growing relationships with clients and investors over time.