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Volatile Times Offer Great Client Servicing Opportunities


NEW YORK - Despite the terrible news about most stocks and mutual funds, investors should heed Sophocles' warning and "don't kill the messenger."

Many investors are so frustrated by recent losses, they are seriously considering firing the crew that was on duty when their losses happened and switching to another investment firm, but with nearly every asset class down 30% to 40% in 2008, they're not so sure a different team will perform better.

While the market outlook looks gloomy throughout 2009, volatile times such as these can be a great opportunity for client servicing to shine. Superior client service can even provide a sustainable competitive advantage, experts say.

"Good performance can make up for client service deficiencies, but good performance never lasts," said Bob Arnold, senior investment officer for the New York State Office of the State Comptroller, at the Financial Research Associates' conference here last week titled "Client Servicing for Institutional Asset Management."

"I've seen firms go down in flames, but their client services staff was able to keep their reputation intact," Arnold said. "Once lost, credibility is hard to regain."

Client service providers act like referees between the huge egos of the portfolio managers and the plan sponsors, he said. Part of their job is to satisfy both clients, while keeping those egos away from each other.

"Client servicing starts even before the actual account is set up," said Andrew Kramer, a principal at Mercer Investment Consulting. "Everybody has different models and expectations. If there's a problem with the portfolio, your clients want to know what's wrong, not what's right. You need to be honest, open and transparent."

"We are going back to the basics. Our focus is on our clients and on providing them with top-notch service," said Joanne Hickman, managing director and head of consultant relationship management at UBS Global Asset Management (Americas). "We are listening to our clients' needs and priorities and trying to figure out how we can help them in this environment."

No one likes hearing bad news, but when something does go wrong, nobody wants to be the last to know. Who should a client service provider tell first, the staff and the trustees, or the consultant? Ideally, you should try to call them both, simultaneously, Hickman said.

"If you know something's going on, let us know right away," said Stephen McCaffrey, senior counsel at Keyspan Corp. "When we have a manager with a problem, we want to hear it from the manager himself, not read it in the newspapers."

"Nothing makes me look dumber than when a client calls and says, 'Can you comment on this?' and I say, 'Comment on what?'" Kramer added.

A good client service professional should know the client's cycle, anticipate their needs and help them prepare for board meetings by getting them information on time.

"Do your homework and know your client," said Thaddeus McTigue, executive director of pensions at the Office of the New York City Comptroller. "You really have to know who you're talking to. Don't be afraid to tell us bad news. Keep a client-focus mindset to create a loyal client base, and don't blame someone else when performance is bad."

"Nobody likes hearing excuses," Arnold said. "I remember one manager who blamed Hillary Clinton for his poor performance [in healthcare stocks]. We got very tired of hearing that. He should have anticipated those things."

Bringing Out the Senior Brass

"During tough times, people want to see the most senior brass as often as possible," said Matthew McGuire, vice president of Ariel Investments.

Making senior management more available is definitely time well spent, said Susan Brengle, director of client service and product management at Eaton Vance Management. "Our clients certainly appreciate the reach out. They are noting who they don't hear from."

While it would be great to visit everyone, of course, there simply isn't time. Firms should try to prioritize by sticking to the Pareto principle or 80/20 rule, which says that 80% of your business comes from 20% of your clients, and your biggest clients should get the most attention.

"Some clients have a big ego and want the portfolio manager to be there at the meeting, and it's important to cater to their needs," said Diya Luke, a consultant for Watson Wyatt. "Our clients tend to be corporations, and often it's a delicate balancing act. We like to dedicate an hour to have an in-depth meeting, rather than just meeting for a cup of coffee."

Luke said it's important to understand the role of the people you're meeting with so your questions are appropriate.

"The portfolio manager can't go to every client," Kramer said, but "a lot of clients are asking pointed questions. You need to have the right person, speaking about the right product to the right client. It's a waste of time to bring someone in who says, 'I'll get back to you.'"

"'I'll get back to you' doesn't cut it during an important board meeting," echoed Ron Gold, president of the Highwood, Ill.-based Gold Consulting. "When you get a new client, ask them how they want you to communicate. Some staff get upset when you go around them." "Client service officers are the lead, but they have to be secure enough to step back when the client wants to speak to the top brass, and the top brass has to be there," said Richard Shaughnessy, founder and principal of Coronado Pacific Group.

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