Storm Copestand
Traders Magazine Online News

Conquering Fear in Trading

In this exclusive to Traders Magazine, therapist Storm Copestand examines how traders can manage expectations and conquer their fear during the entire execution process.

Traders Poll

Amid changes in builder, do you think the CAT project will be completed by 2020?

Free Site Registration

May 31, 2002

CRM Survival Strategy

By David J. Csiki

In hard times companies concentrate on defense rather than offense. That means keeping clients becomes critical.

The same is true for the buyside. Investment managers want to use technology to widely distribute important information while strengthening client relationships.

As a result, there is strong interest in CRM (Customer Relationship Management) software as a tool for maximizing client relationships and service. The TowerGroup estimates that IT spending on the customer knowledge side of CRM in retail financial institutions during 2001 was $4.3 billion. Of that, just over 50 percent - or $2.2 billion - was spent in North America.

The study estimates that North American financial institutions will continue to take the lead in spending on CRM-related information technology, driving an expected compound annual growth rate of six percent in the category between 2001 and 2005.

Wealth Management

Large-scale retail institutions represent a significant portion of the wealth management industry. But there is also heightened interest in CRM solutions within traditional money managers and RIAs (Registered Investment Advisors), which represent the small- to mid-tier of the CRM marketplace.

The overall benefits of implementing a CRM solution include the ability to better track interaction with customers, streamlining and enhancing point of contact with these customers, and identifying profitable relationships for the sale of additional products and services. While these generic benefits would appeal to most firms, there are specific challenges involved in making CRM meet expectations on the buyside.

Since money managers are exclusively in the business of managing portfolios of assets for clients, the most important requirement of an effective CRM solution is the portfolio data itself. This data relates to account, portfolio, performance and trading information. Within the typical systems environment of a buyside firm, there may be a variety of third-party vendor solutions in place to maintain this information.

In fact, a majority of firms utilize systems from many different vendors to meet their needs in these functional areas. The problem with this model is that the information is "locked" up within each of the databases of the underlying systems. End users have minimal access to the data they need.

One of the central challenges of any money management firm is being able to share data between different systems. CRM is no exception.

An effective CRM solution needs to be able to integrate data from these underlying systems in a timely manner. That's a challenge for many of the large-scale CRM solutions that are top-heavy on functionality, but do a poor job on data integration. Further, many CRM solutions are not designed with the specific data requirements of money management.

For a CRM solution to result in measurable ROI, mission critical data needs to be placed in the hands of the people who need it the most, whether they are marketing, client services, portfolio management, administration, or trading personnel.

Management can monitor and evaluate the effectiveness of each part of the organization using a CRM, which results in better allocation and deployment of resources.

In this respect, Web-based solutions make the most sense, since they remove the location dependency and expense of traditional client server software applications. A practical example is a marketing representative making an off-site presentation with the ability to access the firm's performance and portfolio reports directly in front of the client. Deployment of a Web-based CRM is also cost-effective for growing firms with remote offices or external personnel.

While there is debate on the future of IT spending within the broader financial service industry, there is a business need for CRM solutions on the buyside. Demand for CRM can only grow as the industry prepares for T+1.

David J. Csiki is a managing director at INDATA, a provider of enterprise software and STP solutions for buyside firms.