Will robots overrule customer relationships for fund investors?

It boils down to what banks should do with customer relationships. How can they develop a novel approach to succeed in the new landscape?

To start the quest, we need to look at the current state of customer relationships and fund distribution. They have always been central for both the fund companies and banks.

Fund companies want to achieve the best and most efficient distribution of their products at the lowest cost, while banks want to offer an attractive selection of funds coupled with added value to entice customers, not only to stay, but to use more of their products and services.

Platforms came in as an appetizing alternative for fund companies, allowing simplified distribution at lower cost, due to their niche focus, modern technology stacks and reduced overhead costs compared to the banks. Many offer tools to help investors find the right mix in their fund portfolio with the least effort.

But where does this leave the investor and what do customer relationships in this digital age mean? Large segments of investors have become accustomed to digital services and the ease of use they entail, but do investors lose value in exchange for convenience?

"Funds are often not the core business of the banks, but a key component in driving customer acquisition and retention."

The need for guidance exists

According to my analysis, perspectives on digital services differ between banks and fund companies.

For a selected few fund companies, direct distribution of their funds to end customers is a part of their business DNA, often handling the process through in-house transfer agents and having continuous interaction with their investors in several forums.

These companies have not excluded themselves from also utilizing platforms and banks as distributors, but rather view the limited number of direct investors as a means to strengthen their brand and be more than just another name on a screen.

Other fund companies see direct investors purely as a cost driver due to the extensive associated pre- and post-trade activities and opt for platform distribution, bank distribution or have an institutional focus.

Funds are often not the core business of the banks, but a key component in driving customer acquisition and retention. From a retail perspective, it is therefore hugely important to present and package fund instruments as part of a larger value proposition.

For many investors however, it is a jungle out there. In the absence of personal advice, or the preference for digital interaction, investors seek help from actors that do not only offer products, but also digital tools and advisory services to guide them in their investment decisions.

This poses several challenges for banks. Although digital renewal is in full swing at most banks, it is a big ship to turn, and composing the ideal investor experience is not achieved overnight. It includes the complexity of multiple services and products, backed by various IT systems with a healthy portion of compliance requirements thrown in.

Individually tailored digital advisories?

Is this what investor relationships mean in the digital age – a collection of tools and services? Or can banks, platforms and fund companies provide something more than algorithms providing options based on risk appetite, ESG profile or market segment?

My view is that there is a lot to do to provide a holistic approach to the wealth of investors. Funds are much more than investments; they are vehicles to achieve bigger goals.

Individually tailored digital advisories should include investments within a much broader frame of lifestyle, needs and personal ambitions. Investors need to be approached as unique individuals, rather than demographic or risk groups, and our digital strategies need to be adapted accordingly.

One question remains – what is your view?

I look forward to continuing the discussion with you at Fondmarknadsdagen.

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