This experience reminded me of a book called Moments of Truth, written by Jan Carlzon in 19871.
Carlzon was the CEO of SAS Group, the national airlines of Denmark, Norway and Sweden, from 1981 to 1994. When he was first appointed the company was in a bad state. It was losing $17 million per year. It also had a reputation for poor service – a 1981 survey placed it 14th out of 17 European airlines for punctuality. Carlzon is famous for turning this around – within one year of taking over, SAS had become a traveler’s favourite - the most punctual airline in Europe; and it was named Airline of the Year in 1983.
In Carlzon’s book, he defined the Moment of Truth in servicing customers as any point of contact or interaction between a company and its customers at which customers form, or change, their impression of the company. Moments of Truth can be good or bad, great or awful, or nothing special either way. The key point about Carlzon’s approach is that he realised that companies see themselves in a different way to how their customers see them. Companies see themselves in terms of their procedures and processes, their products, their P&L account, their balance sheet; their customers see them in terms of their experiences with the company.
Moments of Truth in Asset Management
Of course Moments of Truth apply to all types of businesses including – and perhaps particularly – to Asset Management organizations.
In Asset Management, Moments of Truth include interactions to discuss client reports, meetings with Relationship Managers, and responding to information requests. These interactions in Asset Management have traditionally been person-to-person interactions, such as meetings, phone calls or videoconferences.
However, as in the airline industry – where I can now book a flight, check in, collect my boarding pass, receive updates about my flight, and get all the way to the departure gate without a single person-to-person interaction or having to collect a piece of paper – digital channels have decreased the practical need for person-to-person interactions. With this in mind, is the customer experience in Asset Management likely to be completely redefined by digital channels over time?
The Evolution of Digital Channels in Asset Management – Future State or Passing Fad?
More forward-thinking practitioners believe that the introduction of digital channels could represent a real change in the way that Asset Management organizations deliver customer services. However,
there are many in our industry who think that investors are intolerant of the delivery of customer services via digital channels, especially institutional investors. Most of these people are inside Asset Management organizations, i.e. the service providers, and I think they are wrong. The point is that investors do not want digital channels to replace more traditional communication and servicing channels, but rather to enhance their customer experience.
For example, five to ten years ago many investment managers implemented extranets and posted PDF copies of client reports on their extranets. They then tried to stop mailing paper copies of reports, and emailing PDF copies, directly to their customers. But the customers resisted. This is used as evidence that institutional investors are not ready to move to digital channels. But that’s not the case. The approach taken by managers actually diluted the customer experience, because it replaced one service delivery mechanism with another, and not everybody wanted to use the new mechanism. Had extranets been presented as an additional delivery mechanism, then this would have been a good Moment of Truth for investment managers, not a bad one.
One must never make the error of thinking that because everybody is not ready to adopt a new approach, then nobody is ready to adopt it. Digital channels have to be introduced alongside more conventional channels, and customers given the option of how they want services to be delivered.
Take wealth managers as an example. This is an area of the Asset Management industry where the use of digital channels in customer servicing is gaining significant traction. Until recently, wealth managers resisted the adoption of digital channels because they were concerned about becoming disintermediated from their customers. But they now realise that they were wrong. Wealth managers who have introduced digital channels have found that they increase customer loyalty, not reduce it.
Why should this be the case? Well think about it. With the conventional approach, investors may get a phone call once a month, a meeting with their advisor two or three times a year, an update on their investments pushed out to them every quarter. But with a sophisticated web portal, they can interact with their manager whenever they want to and as often as they want to, and they can access the detail that they want to see rather than the information that was prepared by their advisor. They may not use the portal often, but the point is that they can use it whenever they want to. That’s a significant change in how investors see their experience with their manager. It’s a great Moment of Truth.
Wake up Before Someone Else Drinks All the coffee
The adoption of digital channels in Asset Management is far from being a passing fad. It will elevate customer servicing in our industry to new levels. Paper reports and face-to-face meetings with Relationship Managers will remain key components of customer servicing for many years to come. But they will no longer be the only channels through which Asset Management organizations deliver customer services. There is a growing demand from investors of all kinds for discrete components of information to be delivered via multiple distribution channels in customised formats.Digital channels are now a Moment of Truth in Asset Management, and firms that are not even considering their adoption are in danger of missing the boat. Or, should I say, missing the flight?
1 Jan Carlzon, Moments of Truth, Ballinger Publishing Company, 1987