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Portfolio > Portfolio Construction

How to Keep Clients Happy Despite a Poor-Performing Portfolio

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Client service greatly influences institutional investors’ satisfaction, and can be managed regardless of the economic climate or investment performance, according to a research study released Monday by Chatham Partners and Investment Metrics.

The study found that 60% of overall satisfaction could be attributed to investment performance, but this could often be cyclical and unpredictable. In contrast, 40% of client satisfaction is attributable to service-related factors that can be delivered consistently. Moreover, managing customer service is not a singular act, but rather a broad collection of activities that combine to create high overall satisfaction levels.

“It is too easy to assume that investor satisfaction is dependent on portfolio performance —it isn’t always about the numbers,” Susan Benedetto, director at Investment Metrics, said in a statement. “Investment Metrics and Chatham Partners wanted to determine how asset managers could differentiate themselves during both lucrative and unprofitable economic times.”

The top five factors attributable to client service, in order of importance:

  • Market/investment knowledge of portfolio team
  • Clarity of investment reports
  • Problem resolution skills of client service representative
  • Frequency of contact of client service representative
  • Timeliness of investment reports

The research mapped Chatham Partners’ client satisfaction surveys and the portfolios they represented to the institutional investment performance reporting and analytics database provided by Investment Metrics’ InvestWorks platform.

Following were key findings of the study:

  • Clients tended to be highly satisfied with their investment managers and client servicing teams overall during long periods of high performance (68%) and short periods of underperformance (58%).
  • The majority of clients who were the most satisfied with their fee arrangements had either high performance rankings over longer periods (69%) or low performance rankings over shorter periods (61%).
  • In contrast, less than 40% of clients were highly satisfied with their fee arrangements during short periods of high performance or long periods of underperformance, while nearly half of all clients were dissatisfied with their fee arrangements regardless of their performance rankings over a short period.  
  • Eighty-three percent of clients were dissatisfied with their client service contact during long periods of low performance, while 66% felt like they were treated as an “important client of the firm” during long periods of high performance.

“We found that investment managers with longer tenures tend to get more leeway in terms of performance than those with shorter tenure, because there is a perception of a relationship and trust earned,” Joshua Dietch, Chatham Partners’ managing director who co-directed the research, said in the statement. “Client service is the embodiment by which one establishes this relationship and trust, so to shortchange this dynamic is to cede one’s future to the cyclical nature of investment performance.” 

Chatham Partners  provides customized market research and strategy consulting services to help businesses understand the explicit, implicit and latent needs of clients and prospects. Investment Metrics is an independent provider of investment performance and reporting solutions to financial professionals worldwide.


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