The questions clients are not asking

Ryan Burns, head of relationship management, North America, for Northern Trust Global Fund Services outlines the three top questions clients should be asking their fund administrators.

Understanding the needs and pressures of fund managers and providing solutions to those problems is critical to success for a fund administrator. As service providers, our first duty is to meet expectations and respond quickly and comprehensively to queries from clients.

Over my two decades of working in this industry, however, I have noticed that clients don’t always ask the questions that are really nagging them. Maybe they assume such questions are out of scope for the fund manager-administrator relationship. Or perhaps they feel they ought to know the answer already. Whatever the reason for it, this reticence can be a lost opportunity.

What keeps a relationship working over years and decades is a true connection between client and provider; if we are doing our jobs we know the questions clients are not asking. In that spirit, let’s look at three types of these questions, and how bringing them up proactively can spark productive conversations and build trust and lead to new solutions.

Should I be concerned about that new regulation?

The global regulatory regime is complex and constantly in flux. Acronyms like AML and GDPR are invented and then thrown around by professionals in so many different contexts, it can be challenging for people in fund management to know how a particular regulation might affect the way they do business. Too often I find clients afraid to admit they are unclear about how a certain rule will impact them. Some think that showing what they do not know will expose a fundamental weakness, or that they will be seen as unqualified. Others may think regulation is a job for the compliance department or something to be addressed after a rule comes into force.

Being proactive can alleviate those worries. A conversation will help the service provider understand which internal clients are grappling with regulations and share information gleaned from other fund managers globally, as well as industry-wide discussions, consultants and experts around the field. Raising these issues can ensure they are brought forward sufficiently before deadlines and addressed in a timely way. 

How can we continue to operate with lower fees?

The trend is clear: asset management fees will continue to be squeezed. The clash with increased regulatory and client requirements means that fund managers have to do more with less.

While I know clients feel this pressure, they hesitate to discuss the situation with their administrator. Some firms are exploring a shift to passive strategies, or a firm-wide reorganisation. But those discussions can be happening on an island and not discussed with outside consultants. Because solution providers work across the industry, helping many clients simultaneously, we are in a good position to discuss responses to fee pressure. What are the advantages of outsourcing functions? Are we missing opportunities to distribute in different channels or geographic markets? Where will additional resources be needed in the future? These are among the questions that asset management organisations large and small need to ask as they consider strategies for responding to the new normal on fees and revenue.

Is the hype around artificial intelligence and machine learning justified?

Many of my clients are reading about incredible advances in computing power and processing. They are familiar with terms like artificial intelligence, robotics and blockchain. But a chasm stands between their emerging understanding of these developments and the ability to implement that technology in their workflow.

In a business where technology sector acumen often drives investment performance, no one wants to seem behind the curve when it comes to technology. But implementation can be a problem even if firms have successfully developed new solutions and processes in an innovation lab environment. A fund administrator can share best practices and experiences of other firms and can help develop an actionable program to show meaningful benefits from technological integrations. This can help make the case for bold, decisive changes.

The adage, “no question is a dumb question,” is especially true in a client-service provider relationship. Chances are, the provider has not only heard the question before, but will be a better position to provide excellent service once that question has been asked. And if a client is too hesitant to ask the question themselves, it is our job to prompt or even ask the question rhetorically to get the conversation started.