WHITE PAPER new opportunities for the firm—establishing new client relationships and increasing assets under management from new client acquisition. “Farming” consists of nurturing and cultivating relationships with existing clients—retaining them and deriving new value from their loyalty. In this white paper, learn why hunting and farming are essential areas of focus for all investment management firms, and how systematic approaches to client relationship management, supported by the right technology, can help investment management firms excel. Executive Summary Investment managers don’t just manage portfolios; just as importantly, they manage relationships. There are two fundamental dimensions to client relationship management activity: “hunting” and “farming.” “Hunting” consists of developing net Hunting & Farming Hunting for Investment Managers Two Client Relationship Imperatives additional revenues from its client base—and a point Introduction: “Hunting” and at which the customer starts to react against constant “Farming” attempts to expand its expenditures. As with agriculture, there is a danger of “overfarming” if the same resources Sales-methodology gurus often use the analogy of are taxed too greatly. “hunting and farming” to describe two different classes of sales activity. “Hunting” consists of seeking out and The logical conclusion is that to truly sustain growth, winning new business; “farming” consists of cultivating businesses must reach an appropriate state of equilibrium additional business within the existing client base. between hunting and farming—one that ensures an adequate accretion of new customers but that also The analogy is popular because it is useful. It helps define capitalizes on sales opportunities within the customer two separate but related lines of sales activity, which from base. It is little surprise, then, that many financial analysts an organizational perspective may require two different consider the balance of revenues from new and existing groups of sales personnel with distinct skill sets and customers to be an important indicator of overall financial work styles best suited to one of the two pursuits. But health and long-term viability. even more importantly, it helps identify and describe two discrete streams of revenue that smart businesses should consider and address in their strategies and Hunting and Farming in Investment day-to-day operations. Management Effectively balancing the hunting and farming revenue Though investment management firms’ sales streams is a critical consideration in the current competitive organizations differ significantly from those of, for business climate. The headlines are replete with stories of example, manufacturing firms or telecommunications firms that have foundered as a result of pursuing one of the companies, the concepts of hunting and farming are no two approaches at the expense of the other. less applicable—and no less useful.

Hunting-focused sales organizations that place all In the institutional asset management space, firms must their emphasis on winning new customers may ignore be continually on the “hunt” for new business: responding the needs of their existing client base. In such an to RFPs, seeking new institutional clients, working with environment, high customer attrition rates are common, consultants, targeting competitor contracts with imminent often fueling a “snowball” effect wherein the need expirations. Increasing assets under management is an to hunt for new customers intensifies as the existing omnipresent goal, and securing new institutional clients is client base erodes. Beyond simply failing to address indispensable to AUM growth. client issues—thereby damaging their reputation and On the flip side, institutional asset managers must also missing an opportunity to gain better insight into market focus on farming their client base effectively, cultivating needs and weaknesses or gaps in product and service opportunities to cement client loyalty and increase share offerings—firms that overemphasize “hunting” overlook of wallet. In this competitive industry, if institutional asset the phenomenal opportunity to sell more easily and cost- management firms place too much emphasis on hunting effectively within their existing client base. and not enough on farming, they risk having new-client The fact that the cost of sale is so much lower when acquisitions undermined by the erosion of their existing selling to existing customers leads some companies, by client base. contrast, to place an inordinate emphasis on farming the client base, rather than acquiring new customers. While The Relationship Factor this is an attractive strategy, The concept of hunting and farming is a simple one, and it has obvious limitations. the benefits of its dual revenue streams are immediately To truly sustain growth, businesses must Despite their best efforts, reach an appropriate state of equilibrium apparent. Investment management, however, is not a all companies experience simple industry. between hunting and farming—one that some customer attrition, so ensures an adequate accretion of new customers but that also capitalizes on a gradual contraction in the In addition to all the transactional complexities of sales opportunities within the customer size of the customer base building and managing client portfolios, institutional base. is inevitable unless new asset managers grapple with an even more elusive and customers are also being troublesome factor: relationship complexity. Institutional added. And while deeper clients are surrounded by a shield-like assemblage of customer focus and close attention to customer needs third parties that can make it infinitely more difficult for the can be invaluable in improving a company’s ability to “hunter’s” arrow to hit its target. Similarly, relationships cross-sell, up-sell, and develop appealing new offerings form an important element of the farming process, and for customers, there is ultimately a point at which the they can act as either fertilizer or herbicide in attempts to company exhausts its options for gaining substantial grow share of wallet.

Pivotal CRM | White Paper 1 Unlike in a simple business-to-consumer sales scenario, “Our focus on client service assures that what we investment managers must navigate an exceedingly do is directly connected to what our clients want complex relationship structure that more closely and need.” resembles a business-to-business interaction1—and a complicated one, at that. Intermediaries such as “One of the keys to our success is our commitment custodians and consultants play a strong role in to our clients.... Our strategies are refined by a influencing client decision-making, but even tracking continuous dialogue with our clients and backed by their roles can be labyrinthine: they may be associated a synthesis of technology and investment talent.” with multiple clients, as well as prospect and competitor Portfolio performance is the undeniable primary focus of accounts; they may play different roles in the investment institutional asset management activity. But it’s far from decisions of different accounts; and, individuals within the only focus. consultancies may change roles and firms. Additional What do the statements above have in common? They all While hunters and farmers may differ influencers and parties include speak to the importance of people and relationships in in their relationship-management lawyers, accountants, and investment management. And they all come from North processes, they share the need for other intermediaries—not to America’s top asset management firms. a holistic client view, insight into mention the numerous roles relationship complexities, and tools to help them build and capitalize on this and hierarchies that may exist Given the central role that relationships play in this knowledge to grow revenues and assets within the client institution industry, client relationship management (CRM) strategies under management. itself. And for each of these and systems are essential to the long-term success of any roles and positions in the investment management firm. client relationship, there are different needs, different communication approaches, and As previously noted, hunters and farmers work differently. different relationship-building considerations. Furthermore, It takes different skills to create the initial sales relationship hunters and farmers will themselves each have different than to keep it alive and profitable in the long term. But engagement styles and relationship dynamics with each CRM can be equally instrumental in enhancing value at of these different contacts. both stages.

Managing these complex relationships is one of the Smarter, Swifter Hunting foremost challenges in investment management, both for the hunters (sales) and the farmers (client services). Institutional asset management salespeople (the core Because hunting and farming processes within investment hunters of investment management) are responsible for management firms are usually quite distinct, some winning new business, which directly increases assets firms overlook the shared importance of relationship under management. Because of this important role, management across both functions. The truth is quite their time is valuable, and the way in which they spend it the opposite: while hunters and farmers may differ in impacts the firm’s finances. Consequently, firms need to their relationship-management processes, they share create conditions under which sales personnel can focus the need for a holistic client view, insight into relationship their efforts as profitably as possible. complexities, and tools to help them build and capitalize The first step in the sales process is the identification of on this knowledge. They also share a goal: to grow targets. Time spent pursuing poorly matched contracts revenues and assets under management. These shared or responding to RFPs without qualifying client mandates needs and goals demand a sophisticated, integrated is time wasted. Similarly, time spent wooing the system: a client relationship management system. wrong influencer is time that could have been used to greater advantage—and profit. To prospect effectively, Relationship Management: The institutional salespeople need to be able to quickly and reliably identify their best targets. Like any hunter, they Shared Principle need to know the best hunting grounds. And once they spot their quarry, they need to know where to aim. “Investment management is a people business, in which intellectual capital drives success.” Precision targeting is a function of available intelligence. CRM systems can furnish two of the best sources of data “We aspire to do business responsibly, and to build about prospects. Firstly, CRM systems offer a wealth trust-based relationships with stakeholders.” of detailed information about existing clients. This data “We are devoted to our clients. We are satisfied only can be used to identify common attributes across the when they are satisfied. There are no exceptions.” firm’s highest-margin clients. Salespeople can apply this to determine the profile of the firm’s ideal targets based on potential value and business fit. Furthermore, in global institutional asset management firms, visibility 1. Little-Gill, Gavin. Targeted CRM Solutions for the Institutional into existing accounts can be invaluable, as it is common Asset Management Market (TowerGroup Research Note), for a target account in one region to be an existing December, 2002. client in another region. Knowing about these clients

Pivotal CRM | White Paper 2 and their successes bolsters the firm’s credibility and account details, and clear on their role and the sequence allows it to build on existing relationships. Secondly, CRM of events. systems can integrate commercially available institutional market data from sources such as Nelson’s data and Using a CRM system to manage the sales process Standard & Poor’s Money Market Directory. By providing has other advantages. Firms can embed their hard- institutional account details earned insights and industry best practices into the such as size, distribution, implementation of a sound, consistent sales methodology Client Relationship Management and management, this data that leaves nothing to chance. Not only can this for Asset Managers,2 a previous assists in segmentation streamline and accelerate the sales cycle—optimizing Pivotal CRM white paper, describes the and enables salespeople productivity—but it can also form an important part of the value that CRM strategies, supported to use the CRM system to firm’s branding, risk-mitigation, and credibility-building. by robust industry-specific technology, Ensuring consistency and professionalism develops could bring to asset management firms. pinpoint those institutional opportunities that meet the brand equity, and recording every step and interaction If you have not already read this paper, firm’s ideal-target criteria. in the system creates audit trails and builds a “corporate we encourage you to read it for a memory” that survives in the event of team member comprehensive overview of the benefits Armed with information about departure. Recording all events and interactions in the investment management firms can similar existing accounts, the derive from CRM. hunters are not only able to CRM system also provides a crystal clear view of account find the best targets—they activity, and the sales pipeline to management for use in also have information about revenue forecasting. similar existing clients to use to inform their strategy with In essence, the sales/hunting process is an attempt to the prospect account. establish a relationship with the institutional client. Next, salespeople must find their best avenue into Every interaction should thus contribute to the an account. The better the CRM system, the better construction of this relationship, from start to finish. their options. CRM systems that are able to track and Furthermore, every interaction should contribute to represent the complex relationships surrounding accounts the foundation of knowledge on which the investment can be invaluable in determining which influencers will management team can draw to personalize and develop have the greatest impact on an prospective account. The this relationship, bringing it to the contractual stage and salesperson must also be able to use the CRM system beyond. Using a CRM system to manage sales helps to find out if these contacts have played the same or ensure that the outcome of the process is not just a sale, different roles in engagements with other prospects but a relationship. or clients. If an RFP has been issued, investment When a new institutional account is won, though the management salespeople can use the information in the hunter has found success and is ready to pass the client CRM system to determine how to angle their proposal and over to the farmer, the relationship is still at its most who to contact to gain insight into the decision process. fragile. Consistency, communication, and efficiency Furthermore, they can use the CRM system to determine are critical in the client on-boarding process, lest the who knows who, and who has worked with each other investment management firm damage the burgeoning on other accounts, identifying contacts and colleagues client relationship in its earliest stages. Automated who may be able to introduce them into this account or workflows within the CRM system can be used to simplify provide additional insight. and accelerate this often-complex process, delivering Once a sales opportunity has been identified and is faster approvals and ensuring every step happens in being pursued, a firm’s competitive advantage can often close succession. Otherwise a well-honed, professional come down to how well it sales process can be rapidly undermined by a sluggish manages the process. Using account-creation system. Communications protocols and transitioning steps can also be managed through the Using a CRM system to manage the CRM system to track sales helps ensure that the outcome every opportunity detail and CRM system to ensure a smooth hand-off from hunter to of the process is not just a sale, but a every interaction, as well as farmer, laying the groundwork for a positive relationship relationship. to plan each ensuing step, is with good farming potential. the secret to effective selling. Salespeople can use CRM dashboards to organize Higher-Yield Farming their personal tasks and action items, enhancing their The fact that it costs five to ten times more to attract a individual productivity. But beyond that, the CRM system new customer than to keep a current one is a truism that is a team collaboration tool that enables specialized is often bandied about, but not always effectively applied sales team members to divide and conquer, assigning to operational or sales strategy. How well does your firm individual steps to the right person to streamline the really do at building client loyalty and deriving ongoing sales process. Using the CRM system as a collaboration value from your client base? hub ensures that each team member is apprised of all

2. To get this white paper, please visit http://www.pivotal.com/resources/white-papers.aspx.

Pivotal CRM | White Paper 3 While the farming, or client services, function is often individual might play a secondary role in consulting for seen as a “softer” set of activities than the sales hunting one smaller institutional account, but may be a major process, the truth is that its stakes are higher. After all, influencer in another, larger account. Failure to recognize unsuccessful hunting will merely fail to add new assets this could lead to poor decision-making in service under management; unsuccessful farming carries with provision, and a lost opportunity to pursue a potentially it the risk of losing those assets that are currently under lucrative relationship. management. One of the cornerstones of effective relationship The richest foundation for management is communication, and in an era of relationship management is increased transparency demands, this is no small The incentives for developing further client knowledge. As noted matter. It is critical to good client service that client client knowledge may wane at the above, the process of building communications be regular, informed, relevant, and farming stage if a firm does not have a solid grasp of how this knowledge can this knowledge begins at personalized. A CRM system is the ideal facilitator contribute to additional revenues. the hunting stage and must for ongoing client communication, with the ability to be assiduously continued track who should receive which reports and who has throughout the farming stage. authority to access certain information. To coordinate Once a prospect becomes a client, it is often much easier client communications, service and relationship action to learn more about the institutional account, its players, plans for the full year can be created within the system, its goals, and its needs. But unlike at the hunting stage, with various milestones noted and tasks assigned to where the strategic advantage of greater knowledge the right individuals at each stage, in keeping with and insight is widely understood, the incentives for relationship-building best practices. The CRM system developing further client knowledge may wane at the can alert users to their required tasks at each stage in farming stage if a firm does not have a solid grasp of how this process, ensuring timely, synchronized team service this knowledge can contribute to additional revenues. It efforts. Furthermore, each authorized team member can is not uncommon for firms to place more emphasis on review all applicable client account information, including getting to know an institutional client before they become details of all past interactions, prior to contacting the a client than after the relationship is actually established. client, ensuring that the firm presents a seamless, unified This is a serious error given that, as at the hunting stage, face to the client, regardless of who is making contact, every service action and interaction contributes to—or and that comprehensive information is at hand in order detracts from—overall reputation and brand credibility. to respond to any inquiries. Users should also be able to Furthermore, as with any relationship, you get out of it quickly and easily enter reports following each of their own what you put in, and as with all farming, crops will not interactions with the account. survive long if left untended. Greater customer knowledge allows for deeper and more One advantage of deep client knowledge has already satisfying personalization of the client experience. Using been discussed: the role it can play in helping define the CRM system to track client preferences, such as ideal target-customer characteristics for hunters. This the desired frequency of contact and preferred format client-base analysis and segmentation can also be a for reports and other communications, enables the source of great insight for farmers. For one thing, a CRM investment management firm to easily provide the kind system that tracks thorough client information can also of individualized treatment and experience that many easily reveal true client value to client services users: the institutional clients demand. assets under management by the firm, the share of the full client wallet that this figure represents, the cumulative Effective CRM usage also allows investment management revenues recognized from serving this client, and last but services personnel to transform their roles from reactive to not least, the cumulative cost of serving the client. This proactive. Effective contract tracking and expiration alerts information can be used to allow client services representatives to take special steps develop a more strategic to ensure contract renewals, perhaps giving accounts Greater customer knowledge allows specialized care in the months leading up to renewal for deeper and more satisfying approach to client services, and securing early buy-in from key stakeholders. Client personalization of the client experience. focusing resources where they get the highest returns. services personnel can also use the CRM system to spot It can also lay the foundation problems early and ensure they never reach a critical for creating differentiated service levels based on client stage or jeopardize an account. value, so that providing service to clients is never done Another way in which CRM can help client services staff at a loss. By tracking complex relationship structures be more proactive is in cross-selling and up-selling. At and individual roles within the CRM system, similar kinds the most fundamental level, the 360-degree client view of value calculations can be performed at the individual provided by the CRM system makes it infinitely easier for level, providing greater insight into overall value that may client services personnel to identify potential up-selling be masked by relationship complexity. For example, an and cross-selling opportunities, whether on a firm-wide

Pivotal CRM | White Paper 4 scale by segmenting the entire client database or on Pivotal CRM enables asset managers to fully integrate an individual ad hoc advisory basis. Action plans for sales, marketing, and service functions for increased client service can include systematic up-selling and efficiency and effectiveness, providing a complete view cross-selling prompts timed to coincide with contract of the client so users from all areas of the company milestones and other events in a coordinated attempt to can personalize their client interactions. Pivotal CRM grow share of wallet. Beyond that, client services staff can saves time and increases productivity by automating analyze aggregated data to and facilitating workflows for important multi-stakeholder identify potential opportunities processes, such as opening new accounts and Pivotal CRM for Institutional for the development of responding to RFPs. It also provides visibility into complex Asset Management new offerings. They can networks of affiliation and influence, allowing IAMs to • A 360-Degree Client View also use the sophisticated more successfully track consultant activity and identify relationship-tracking features new opportunities. • Workflow Management to identify relationships, such • Consultant Management as consultants with significant With major global asset management firms around the world using its CRM solutions, the Pivotal CRM team • Proposal Tracking influence over attractive prospect accounts, whose has proven time and time again its ability to dramatically • RFP Process Management full value has not been increase productivity, grow assets under management, • Opportunity Management adequately explored. and foster strong client, custodian, and consultant relationships in the asset management industry. • Sales Forecasting By applying a two- • Activity Management pronged approach of The Pivotal CRM team's approach ensures a faster time-to-market with a lower total cost of ownership, by • Relationship/Influence Tracking cost reduction—through streamlined service efforts and delivering financial-services solutions on the scalable • Event Management ® differentiated service levels and flexible Microsoft platform, which supports easy • Expense Tracking based on client value—and customization, integration, and deployment. Institutional asset managers can rapidly and cost-effectively adapt • Regulatory Compliance revenue generation —through proactive renewal tactics, the Pivotal CRM solution to meet changing compliance • Performance and Client strategic up-selling and and operational demands, and grow with their business— • Reporting cost-selling, and better today, tomorrow, and in the future. leveraging of influential To learn more, please call us at +1 877-PIVOTAL or visit relationships—investment www.pivotal.com/financialservices. management firms can turn client service into a significant contributor to profits and AUM.

Pivotal CRM for Institutional Asset Management Pivotal CRM for Institutional Asset Management® is designed to help investment management firms meet the challenges of hunting, farming, and beyond—enabling employees to collaborate across departments to provide consistent, exceptional service to their clients while growing assets under management. A complete customer relationship management solution, Pivotal CRM enables investment management firms to increase productivity and decrease operational costs by dramatically improving the efficiency of their client-facing services. At the heart of this solution is a toolset to help build superior client relationships that promote loyalty and increase client retention.

Pivotal CRM for Institutional Asset Management offers a rich set of features that mirror the processes commonly used by institutional asset managers, combined with the flexibility to mold to individual firms’ unique processes and environments. This combination of industry-tailored and custom components, along with the inherent flexibility of Pivotal CRM, leads to a lower total cost of ownership for Pivotal CRM customers.

Pivotal CRM | White Paper 5 Pivotal CRM: More Efficient Hunting Need Solution

Identify appropriate targets • Rich client database helps identify common attributes and firm “sweet spot,” as well as existing clients in other geographies whose other divisions may be good targets • Integration of money-market data helps segment and pinpoint targets based on size, distribution, and management Determine key account • Tracks complex relationship structures and roles, such as consultants, custodians, and other influencers influencers, in an easy-to-understand manner • Makes it easy to identify individuals’ varying roles in different accounts

Manage the sales/contract • Enables team members to collaborate in the development of RFP responses, and other tasks process through workflow tools and shared resources/views • Allows users to assign individual steps to the right person to streamline the sales process • Empowers firm to embed consistent sales methodology for greater consistency and control Manage the client on-boarding • Automated workflows can be used to simplify and accelerate account-opening processes, process delivering faster approvals and ensuring every step happens in close succession • Comprehensive relationship and activity tracking ensures smooth handoff to informed farmer

Pivotal CRM: More Profitable Farming Need Solution

Keep track of complex • Tracks complex relationship structures and roles, such as consultants, custodians, and other relationship structures between influencers, in easy-to-understand manner clients and intermediaries Identify cross-selling and up- • Tracks assets under management and share of wallet for insight into opportunities for growth selling opportunities • Enables users to note cumulative revenues recognized from individual clients, as well as cost of serving the client • Helps firm determine highest-value services Provide proactive client service • Allows service and relationship action plans for the year to be planned out in full, with tasks assigned to the right individuals at each stage • Enables firm to be proactive about extending/renewing contracts Deliver personalized client • Deliver personalized client experience experience

Conclusion: Finding the Right Balance and client services person may differ dramatically. But both have the potential to nourish the firm in distinct yet Why use the analogy of hunting and farming for complementary ways. investment management client acquisition and servicing? At first, few images may seem further apart than the rifle- By recognizing the shared revenue-generating potential of toting hunter or tractor-riding farmer and the suit-wearing its “hunters” and “farmers,” and supporting their unique investment manager signing major pension fund contracts abilities to develop strong, profitable relationships with in a corporate boardroom. But the point of the analogy is institutional clients by implementing the right integrated neither to entertain nor to oversimplify; its objective is to CRM technology tools, investment management firms demonstrate that client acquisition and client services, like can find the optimal balance between these two revenue hunting and farming, are two different-styled approaches streams, and derive ongoing value from their client to securing sustenance that must both be supported to relationships. create a balanced environment.

As with the hunter and the farmer, the skills and daily activities of the investment management salesperson

For more information or a complete list of our worldwide offices, please visit www.pivotal.com.

Copyright © CDC Software 2007. All rights reserved. The CDC Software logo and Pivotal CRM logo are registered trademarks and/or trademarks of CDC Software.