Market Update

From constraint to catalyst: COVID-19, technology and the emergence of “smart relationships”

From constraint to catalyst: COVID-19, technology and the emergence of “smart relationships”
Executive summary
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The COVID-19 crisis was initially seen as a constraint on relationships between asset mangers and institutional investors. However, the increased focus on technology that the crisis has driven may ultimately prove to be a catalyst for positive change.
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Personal relationships will always underpin the trust between managers and clients, but the remarkable events of 2020, coupled with new digital client relationship and portfolio analytics tools, have served to show that the overall process can be significantly enhanced.
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The traditional approach to building relationships, based around in-person meetings, is in many ways inefficient and outdated. Some aspects have not altered substantively for several decades.

According to research by financial services consultancy Cerulli, 95% of asset managers found face-to-face meetings “very effective” in engaging with institutional investors in 2019. Little could any of them have known during these encounters that within a few months, thanks to COVID-19, such interactions would be impossible.

The pandemic has essentially shut down business travel, plunging organizations of all kinds into an urgent rethink of how they build and maintain relationships. The resultant switch to virtual meetings has been widely viewed as constraining: Cerulli has recently reported that more than two thirds of asset managers – 67% – find the absence of in-person contact “challenging”.

As the saying goes, however, a crisis is a terrible thing to waste. We are now realizing that these unprecedented circumstances are catalyzing a digital fast-forward towards the behavioral changes and technological innovation necessary to make “smart relationships” a reality.

Such relationships aim to generate non-investment alpha by leveraging state-of-the-art tools that elevate video conferencing and other virtual meetings to a new level of client-centricity. These tools place at managers’ fingertips the analytic and diagnostic firepower required to address institutions’ needs, devise holistic solutions and share relevant insights in real time.

This is far removed even from many successful face-to-face dialogues, which might still be at the mercy of unanticipated developments that bring progress to a comparative halt. Yet it could be only the start: as digital integration between managers and clients intensifies, the transparency, accessibility, frequency and scope of interactions should improve yet further – bringing multiple benefits for all parties.

It is true that personal relationships will always form the bedrock of trust between managers and institutions. Many on both sides it will rightly welcome the resumption of in-person engagement once again becomes feasible. As we explain in this paper, though, none of this means that the process as a whole cannot be significantly enhanced.

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