The beat goes on….

Remember vinyl records? How about music tapes and CDs? Are they relics? Perhaps they are on their way, according to “Global Music Report 2017.”[1] From 2005-2015, revenue from physical forms of recorded music declined from $17.9 to $5.8 billion. That’s a drop of 68% in 10 years. At the same time, the fortunes of digitally recorded music soared more than 60%. In 2016, digital music, driven by streaming, accounted for 50% of global revenue for recorded music.

Why do I raise this issue in a capital markets blog? This same trend is occurring in asset management. Our industry is going from physical to digital in a number of ways. Consumers in both industries – and others – are changing their preferences for the delivery of services.

In the music industry, digitalization offers consumers choices and personalization. For example, why buy a whole album on a CD or other format when you like just one or two songs? Download only those you want on ITunes. Digitization also has meant personalization: Create your own stations on Pandora. On Spotify, share playlists with friends and, with GooglePlay Music, listen to music that suits your mood. And you can add, delete and start all over simply and cost effectively.

What’s the lesson asset managers can take from changes in the music industry? Engage clients in novel, digital and personalized ways.

It’s a new day….

For financial services, digitalization also promotes personalization. Customers can bank online or with bots. Those doing business with asset management firms can work with live advisors or robo advisors who meet their custom needs any day, any time.

In this new era for financial services, research by Accenture has identified “client personas” that fall into three categories.[2] They are:

  • Nomads – digitally active, primed for a new model of delivery
  • Hunters – searching for the best price point
  • Quality Seekers – looking for high touch, responsive service and data protection

It’s important for asset managers to help advisors and distributors understand and respond to the needs of these investor personas. So let’s learn more about each group.

Nomads likely are digital natives, either reared in the digital era or adept at all things online and mobile. Not tied to traditional providers, they would be content to use Amazon or Google for financial services. It’s no surprise that they value digital innovation – new ways of accessing services and advice. When it comes to sources of financial advice, they are more likely to view online tools as useful rather than human financial service providers. Are they receptive to making investment decisions based on automated support? You bet they are.

Hunters pursue value for their money. In terms of loyalty, the price point prevails. For them, there is little blurring of lines when it comes to the source of non-regulated fiduciary advice they find most useful. And are they are willing to adapt to a digital future? Yes, when they find new virtual spaces to connect with their advisor.

Quality Seekers want financial service providers who put customers’ interests first – specifically their interests. Trust is the critical factor that ties them to an advisor, coupled with confidence that their personal information will remain secure. For this group, customer service carries clout. They expect highly personalized and specialized service from their investment advisor. But that must go hand-in-hand with extreme care in protecting their sensitive data and assets. What about cost? That doesn’t move them, but trust, security and service do.

A change would do you good….

What’s the main message for savvy asset managers? Firms should take note. Adapt. Dip your toes in the digital waters. Help advisors and distributors understand and respond to the needs of investor personas. Think of it along the following lines: “To succeed in 2025, the work begins now.”

[1] http://www.ifpi.org/downloads/GMR2017.pdf

[2] https://www.accenture.com/us-en/insight-banking-distribution-marketing-consumer-study

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