The following should explain how and why an important IT investment decision has been made on a local level (AXA IM GmbH) triggering global changes within the AXA IM overall business model.
As stated before the German entity wanted to maintain autonomy not only in their sales/marketing process but also for the "production side" (= managing the assets for the German insurance group and third parties of approx 35 bn EUR in 2002). Most of the assets were managed in fixed income portfolios following strict client and legal guidelines. The equity portion was partly managed by AXA Rosenberg out of California and partly by 2 German team members for the European/German equity portion. Fixed Income was managed out of Frankfurt by a team of 4.
As Paris headquarter followed an integration strategy for all external asset management entities trying to bring some of the portfolio managers to a single location and if that was not possible transfer the assets to Paris, local management in Frankfurt had to justify the need for local production and defend the budget constraints.
Technically speaking when assets migrate to another location, the money physically remains at the local custodian bank. Only the investment decisions will be made and implemented by the new location but executed through the local custodian. The most popular argument for such a step was of course cost optimization but also harmonization of investment strategy and portfolio construction processes as well as exercising regular control mechanism.
Until that time local portfolio management decided on their own investment trades - based on a global macro view of the world - and traded locally with a pool of broker houses according to the best execution principles (selecting the broker with the best price offering for a given trade). Whenever Frankfurt decided on trades, Paris would not see it in their systems and therefore could not participate in these trades (which could have created economies of scales for broker fees). The only way of maintaining local portfolio managers would be to create greater transparency within the portfolio management and implementation decisions as well as execute combined trading within several entities.
Frankfurt senior management - to which I belonged at the time - decided to invest into an integrated financial portfolio management system (FPM developed by Computer Design) that increased efficiency and allowed trades to be visible to Paris portfolio management. The system covered the following areas: Order Management, Back Office, Compliance, Performance measurement & attribution. FPM was compatible with the previous system used by Paris portfolio management although their local clients continued being managed through the former system. It was important that headquarter could "see" the trades decided by Frankfurt portfolio management in real time before the custodian would send a consolidated report at the end of the day. Our Frankfurt senior management team defended the case to the global head of portfolio management and obtained the split of expenses for the system between Frankfurt and Paris. Implementation lasted approx 4-6 months and we managed to maintain a certain number of Portfolio manager colleagues in Frankfurt as well as their client portfolios (unfortunately not all of them).
The implementation of the new software lead to a strategy switch at AXA IM Paris finally introducing the "Multi-Expert-Business Model" in 2002 where some product management expertise stayed in different locations while following central guidelines. For most of the clients that business proposition was very valuable during those years as most of the global investment management firms centralized their "production entities" often leaving frustrated clients behind who then would take their money and left to the competition.
Is is hard to measure the success of FPM in terms of net new assets under management (which would be the correct measure to take). Some of those new assets could be gathered because of good performance or existing relationship and less because of changes in the front office tool. It is clear however that existing clients very much appreciated the new strategy (being serviced by their usual portfolio manager) and that new prospects liked the tailor made approach.
Source: AXA IM Asset Managers, Frankfurt
Saturday, July 31, 2010
Portfoliomanagement/trading tool at AXA Investment Managers, Frankfurt
Once again I have to go back in history in order to provide an example of IT investment undertaken in one of the companies I have worked for. The only IT investment done in my current organization has been the CRM system that I have described in my previous postings. I apologize for delivering an example that might be a bit "out of time" but that still gives interesting insights into the management of the foreign subsidiary of a global corporate company.
AXA Investment Managers, based in Frankfurt, started as a fully fledged asset management firm for the German speaking market with its headquarter in Frankfurt. Initially the company operated as a spin-off of AXA Insurance Group Germany in 1994 and serviced mainly the AXA Nordstern insurance group in managing their asset base. Over the years third party business was acquired and the entity became more and more independent from the insurance group. In 1997 AXA IM Paris and London took over the majority of the shares and started integrating portfolio management, sales & marketing and client service into the global AXA IM network.
Until 2002 client portfolios were almost entirely managed out of Frankfurt following guidelines from the Paris and London office. However it became clear that the number of portfolio managers based in Frankfurt was too high in order to manage the business in a profitable manner. Since specific client guidelines for the many separate mandates that AXA IM managed required a local portfolio management the Frankfurt management team decided to fight for keeping its independence. The question was how could Paris be convinced that a small team of portfolio managers would still follow overall guidelines, be linked to the Paris execution desk and still offer local tailor made service?
AXA Investment Managers, based in Frankfurt, started as a fully fledged asset management firm for the German speaking market with its headquarter in Frankfurt. Initially the company operated as a spin-off of AXA Insurance Group Germany in 1994 and serviced mainly the AXA Nordstern insurance group in managing their asset base. Over the years third party business was acquired and the entity became more and more independent from the insurance group. In 1997 AXA IM Paris and London took over the majority of the shares and started integrating portfolio management, sales & marketing and client service into the global AXA IM network.
Until 2002 client portfolios were almost entirely managed out of Frankfurt following guidelines from the Paris and London office. However it became clear that the number of portfolio managers based in Frankfurt was too high in order to manage the business in a profitable manner. Since specific client guidelines for the many separate mandates that AXA IM managed required a local portfolio management the Frankfurt management team decided to fight for keeping its independence. The question was how could Paris be convinced that a small team of portfolio managers would still follow overall guidelines, be linked to the Paris execution desk and still offer local tailor made service?
Friday, July 30, 2010
Business Intelligence initiatives at Bankhaus Warburg
Prior to coming to Miami I worked at a German private bank (100% owned by 3 private families) called Bankhaus Warburg & CO based in Hamburg, Northern Germany. It is fair to say that this bank was not exactly cutting edge in technology but tried to catch up with its Peers in the German private banking community.
My job consisted in managing a small team of sales people/relationship managers who were supposed to work on existing institutional clients as well as on new relationships (cold calling) and to offer the entire product range of Warburg & CO. At this time Warburg had several subsidiaries in Hamburg, Frankfurt, Zurich and Luxemburg each of them using separate sales entities to sell specific product ranges. Prior to my arrival there was no central entity overseeing all institutional clients that were defined as local corporate pension funds, intra-professional pension funds, foundations, insurance groups, churches etc.
Not only did I cover several client segments but the goal was to distribute a variety of investment solutions that were produced in separate entities - sometimes subsidiaries - who most of the time did not communicate with each other on a regular basis.
My first goal was to identify existing relationships within the group and to enter them into a basic CRM system that the firm had bought beforehand. In a second step those relationships needed to be classified according to the products they had invested in or for which they had contacted the bank in the past. The same applied for new prospects that the team needed to assess in terms of product interest and potential profitability on a short/medium term basis.
The existing database only offered a "one dimension approach" which was to store the contact information, notes about meetings and define the product area that was concerned. However the database could not communicate with the 2 other CRM systems used in the various subsidiaries that had already set up similar databases for their employed sales force. If the centralized approach was meant to be successful, a central, integrated IT solution was necessary. Otherwise most of the information gathered by the new team would be stored in a space that nobody could see and the follow up on product requests, interests etc was limited to a small number of people.
It took a while to convince the private partners of the bank to fund a new technology and to overcome the existing organizational behavior patterns and "old fashioned" client management processes that were implemented on a single product entity basis.
The decision was made by the senior management team consisting of 6 partners. IT was not involved at that stage and the partners only decided, that an integrated "IT tool" had to be found and implemented in order to enhance sales activities in the institutional department. Costs should not exceed 15.000 EUR. The decision making process was straight forward once the arguments were made as this is mostly the case in privately owned firms. The implementation took very long though and reflected the fact that existing sales people were very hesitant to give up their individual approach.
IT got involved and developed an in-house Access based application that was added to the existing CRM database and was meant to help establishing a link between a client visit (performed by the central sales department employee - i.e. myself) and the various entities among the Warburg Group that were involved with this new client. The new application was used for mainly optimizing the follow up of client meetings and thus speeding up the sales process. In a second time (that I did not participate in) there was a project for using hand-held devices that the sales person could use during a meeting and entering information for follow up / product requests etc on time. The information would be synchronized with the 3 existing databases once the sales person got back into the office and linked the device to the main computer. Wireless data transfer capability was not provided for that project (in 2006). Once the meeting was over all product areas that were involved in follow ups were informed in almost real time and could start working on that relationship. Which made the centralized client approach much easier to implement and also more efficient (again helping to establish a reputation within the organization).
Since I left the firm in 2006, I did not experience the implementation of the new devices and its impact on the profitability of the company. The goal initially was to harmonize and optimize sales processes and then to offer a "single face" approach to institutional clients. The expectation was that this approach would generate more revenues because of increased client satisfaction and less overlap in marketing activities by several product entities. According to some rumors I have heard in the meantime the system has technically been implemented but is not fully used by all sales people of the organization and therefore does not produce the cost reduction and revenue increase we had predicted in the planning process.
My job consisted in managing a small team of sales people/relationship managers who were supposed to work on existing institutional clients as well as on new relationships (cold calling) and to offer the entire product range of Warburg & CO. At this time Warburg had several subsidiaries in Hamburg, Frankfurt, Zurich and Luxemburg each of them using separate sales entities to sell specific product ranges. Prior to my arrival there was no central entity overseeing all institutional clients that were defined as local corporate pension funds, intra-professional pension funds, foundations, insurance groups, churches etc.
Not only did I cover several client segments but the goal was to distribute a variety of investment solutions that were produced in separate entities - sometimes subsidiaries - who most of the time did not communicate with each other on a regular basis.
My first goal was to identify existing relationships within the group and to enter them into a basic CRM system that the firm had bought beforehand. In a second step those relationships needed to be classified according to the products they had invested in or for which they had contacted the bank in the past. The same applied for new prospects that the team needed to assess in terms of product interest and potential profitability on a short/medium term basis.
The existing database only offered a "one dimension approach" which was to store the contact information, notes about meetings and define the product area that was concerned. However the database could not communicate with the 2 other CRM systems used in the various subsidiaries that had already set up similar databases for their employed sales force. If the centralized approach was meant to be successful, a central, integrated IT solution was necessary. Otherwise most of the information gathered by the new team would be stored in a space that nobody could see and the follow up on product requests, interests etc was limited to a small number of people.
It took a while to convince the private partners of the bank to fund a new technology and to overcome the existing organizational behavior patterns and "old fashioned" client management processes that were implemented on a single product entity basis.
The decision was made by the senior management team consisting of 6 partners. IT was not involved at that stage and the partners only decided, that an integrated "IT tool" had to be found and implemented in order to enhance sales activities in the institutional department. Costs should not exceed 15.000 EUR. The decision making process was straight forward once the arguments were made as this is mostly the case in privately owned firms. The implementation took very long though and reflected the fact that existing sales people were very hesitant to give up their individual approach.
IT got involved and developed an in-house Access based application that was added to the existing CRM database and was meant to help establishing a link between a client visit (performed by the central sales department employee - i.e. myself) and the various entities among the Warburg Group that were involved with this new client. The new application was used for mainly optimizing the follow up of client meetings and thus speeding up the sales process. In a second time (that I did not participate in) there was a project for using hand-held devices that the sales person could use during a meeting and entering information for follow up / product requests etc on time. The information would be synchronized with the 3 existing databases once the sales person got back into the office and linked the device to the main computer. Wireless data transfer capability was not provided for that project (in 2006). Once the meeting was over all product areas that were involved in follow ups were informed in almost real time and could start working on that relationship. Which made the centralized client approach much easier to implement and also more efficient (again helping to establish a reputation within the organization).
Since I left the firm in 2006, I did not experience the implementation of the new devices and its impact on the profitability of the company. The goal initially was to harmonize and optimize sales processes and then to offer a "single face" approach to institutional clients. The expectation was that this approach would generate more revenues because of increased client satisfaction and less overlap in marketing activities by several product entities. According to some rumors I have heard in the meantime the system has technically been implemented but is not fully used by all sales people of the organization and therefore does not produce the cost reduction and revenue increase we had predicted in the planning process.
Friday, July 9, 2010
Implementation of a CRM system for fund distribution
The business model of the fund distribution company I used to work until recently was to identify the best asset managers in the US - mainly from the equity arena - copy a succesful US product, "package" it within a Luxemburg based umbrella structure and distribute it outside the US with a strong focus on Europe. At some point in time a sales rep office in Brazil opened in order to serve on-shore Brazilian clients.
The founders of the firm came from a brokerage background and used to perform their task the "traditional" way by using business cards of their prospect and client contacts and hand-written notes for every single contact that was performed (phone or physical). Between 2002 and 2007 the firm hired more sales people in Miami as well as in other countries and ended up having 8 active sales people calling on potential investors all over the world. Administration of the funds was performed in Luxemburg, marketing and fund reporting was offered through an administrative team based in Miami. Therefore the main task of all country representatives was to make sure that the funds comply with local regulation and where necessary go through legal registration processes, position the funds on the major local administrative platforms and then sell to a targeted group of potential clients (on average each sales person had to follow approximately 150-200 client names).
Without IT support it became clear that not only was it impossible to follow up on every single contact and make sure that this contact receives the information he had requested during the last contact. But also there was no synergy happening between different country sales reps who did not share any of their market information or client visit notes. Although some global financial distribution organizations such as UBS, Credit Suisse or Morgan Stanley operate on a global basis they were covered by multiple sales people independently.
The business case for a Contact and Customer Relationship management system was not difficult to make (although some sales people still resisted) and one of the partners and myself were assigned to the project team in order to chose and implement the right and affordable software. Another important argument in favor of a CRM system was the important value that an extensive and updated client database represents for the company whose main focus is to distribute into different markets. There was the plan to sell the business in a certain number of years and that database would certainly play an important role in defining the price.
The overall goal of the future CRM system was to
- track every single contact to prospects and clients
- allow synergies between all sales employees and cross selling within global financial institutions
- ensure data security, specially for client data (such as amount of investments, gains/losses on portfolio investments, tax information etc)
- allow senior management to obtain regular sales activity reporting and track efficiency of single sales people.
The project team started to assess the needs of every user/sales person for their daily activity and to inform about the advantages of a CRM database. That process took approximately 3 months and some employees had to be convinced about the need and advantages of the system. It became obvious from the beginning that the majority of the people had no clear idea of what exactly they needed from an IT support and how they could formulate it. We established then a process chart going through every single step of a prospect approach starting with cold calling activity, follow up activities until the finalization of a deal and the servicing of a client.
Among the features to be included was the distinction between "prospects" and "clients".
Prospect information must include:
- general information about the entity (contact details, contact person etc)
- personal information about the main contact (birthday, family situation etc)
- detailed information about calling activity (phone and visits) as well as any follow-ups performed for this client
- a search application that allowed to group prospects by geography, order of importance, interest for a given product, profitability in the sense that after a certain number of contact attempts some business had to follow and if that was not happening the prospect would fall into a different category.
Client information completed the above mentioned information with the following data:
- selected products
- Transactions and volume of assets under management (regular update)
- fee structure applied and revenue per client
- gains and losses per product
Most of the large asset management companies I used to work for did not find an off-the shelve solution but customized existing databases (such as Siebel) and added company specific features to it. However this could only be done if there was sufficient funding for the project and a clear commitment to the CRM idea.
In the recent case one of the founding partners still did not believe in the benefits of a IT supported client information system and therefore was not willing to pay a lot for its implementation. He claimed that such a system would only be viable if everybody was disciplined enough to enter data and update the data on a regular basis. Starting with himself he would not commit himself to that task claiming a "lack of time".
At that point the project team decided to nominate one "data manager" who would be in charge of supervising the entry of all relevant client/prospect/product information into the database following a fixed format, enter that data for those sales people who did not have time to do it (mainly one partner) and who would also administer the access rights between single country data sets that to some people should remain confidential.
Based on our single interviews, the assessment of needs and requirements and within the reach of a limited budget (approx 5.000 USD) we decided to implement the ACT! client and contact database developed by SAGE. It was certainly not the perfect software but one that came close to our requirements. It does support the Microsoft Outlook environment which was one important factor for many sales people who wanted to be able to send client visit reports or other information out via email by using the text in the ACT template and avoiding to retype it again in a separate email. We had no budget for any customization and therefore suffer sometimes from a US bias of ACT! for certain screens. But overall acceptance was positive and in the meantime an upgrade to the 2010 version has been performed.
Outcome:
The project lasted for approx 5 months. As of today more than 4000 contacts globally are documented in ACT. There is a lot of information sharing between similar countries such as Italy and Germany in terms of comparing client visit notes and learning from situations that could arise in either country. Quick client grouping can be one in cases where a given product provider organizes a roadshow in a country and need to find those clients that show an interest in that particular product. Or the manager comes through a region/town and wants to know who would be available in that area.
And finally there is also growing recognition of the data value for potential buyers of the company who strongly rely on that existing book of business.
Sources: Selector Management, Miami
The founders of the firm came from a brokerage background and used to perform their task the "traditional" way by using business cards of their prospect and client contacts and hand-written notes for every single contact that was performed (phone or physical). Between 2002 and 2007 the firm hired more sales people in Miami as well as in other countries and ended up having 8 active sales people calling on potential investors all over the world. Administration of the funds was performed in Luxemburg, marketing and fund reporting was offered through an administrative team based in Miami. Therefore the main task of all country representatives was to make sure that the funds comply with local regulation and where necessary go through legal registration processes, position the funds on the major local administrative platforms and then sell to a targeted group of potential clients (on average each sales person had to follow approximately 150-200 client names).
Without IT support it became clear that not only was it impossible to follow up on every single contact and make sure that this contact receives the information he had requested during the last contact. But also there was no synergy happening between different country sales reps who did not share any of their market information or client visit notes. Although some global financial distribution organizations such as UBS, Credit Suisse or Morgan Stanley operate on a global basis they were covered by multiple sales people independently.
The business case for a Contact and Customer Relationship management system was not difficult to make (although some sales people still resisted) and one of the partners and myself were assigned to the project team in order to chose and implement the right and affordable software. Another important argument in favor of a CRM system was the important value that an extensive and updated client database represents for the company whose main focus is to distribute into different markets. There was the plan to sell the business in a certain number of years and that database would certainly play an important role in defining the price.
The overall goal of the future CRM system was to
- track every single contact to prospects and clients
- allow synergies between all sales employees and cross selling within global financial institutions
- ensure data security, specially for client data (such as amount of investments, gains/losses on portfolio investments, tax information etc)
- allow senior management to obtain regular sales activity reporting and track efficiency of single sales people.
The project team started to assess the needs of every user/sales person for their daily activity and to inform about the advantages of a CRM database. That process took approximately 3 months and some employees had to be convinced about the need and advantages of the system. It became obvious from the beginning that the majority of the people had no clear idea of what exactly they needed from an IT support and how they could formulate it. We established then a process chart going through every single step of a prospect approach starting with cold calling activity, follow up activities until the finalization of a deal and the servicing of a client.
Among the features to be included was the distinction between "prospects" and "clients".
Prospect information must include:
- general information about the entity (contact details, contact person etc)
- personal information about the main contact (birthday, family situation etc)
- detailed information about calling activity (phone and visits) as well as any follow-ups performed for this client
- a search application that allowed to group prospects by geography, order of importance, interest for a given product, profitability in the sense that after a certain number of contact attempts some business had to follow and if that was not happening the prospect would fall into a different category.
Client information completed the above mentioned information with the following data:
- selected products
- Transactions and volume of assets under management (regular update)
- fee structure applied and revenue per client
- gains and losses per product
Most of the large asset management companies I used to work for did not find an off-the shelve solution but customized existing databases (such as Siebel) and added company specific features to it. However this could only be done if there was sufficient funding for the project and a clear commitment to the CRM idea.
In the recent case one of the founding partners still did not believe in the benefits of a IT supported client information system and therefore was not willing to pay a lot for its implementation. He claimed that such a system would only be viable if everybody was disciplined enough to enter data and update the data on a regular basis. Starting with himself he would not commit himself to that task claiming a "lack of time".
At that point the project team decided to nominate one "data manager" who would be in charge of supervising the entry of all relevant client/prospect/product information into the database following a fixed format, enter that data for those sales people who did not have time to do it (mainly one partner) and who would also administer the access rights between single country data sets that to some people should remain confidential.
Based on our single interviews, the assessment of needs and requirements and within the reach of a limited budget (approx 5.000 USD) we decided to implement the ACT! client and contact database developed by SAGE. It was certainly not the perfect software but one that came close to our requirements. It does support the Microsoft Outlook environment which was one important factor for many sales people who wanted to be able to send client visit reports or other information out via email by using the text in the ACT template and avoiding to retype it again in a separate email. We had no budget for any customization and therefore suffer sometimes from a US bias of ACT! for certain screens. But overall acceptance was positive and in the meantime an upgrade to the 2010 version has been performed.
Outcome:
The project lasted for approx 5 months. As of today more than 4000 contacts globally are documented in ACT. There is a lot of information sharing between similar countries such as Italy and Germany in terms of comparing client visit notes and learning from situations that could arise in either country. Quick client grouping can be one in cases where a given product provider organizes a roadshow in a country and need to find those clients that show an interest in that particular product. Or the manager comes through a region/town and wants to know who would be available in that area.
And finally there is also growing recognition of the data value for potential buyers of the company who strongly rely on that existing book of business.
Sources: Selector Management, Miami
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