Communication Challenges for Fund Management Firms

Antonio Salido, marketing and strategy consultant specializing in the financial sector explains the challenges currently faced by fund managers including: the digitalization, the regulatory changes, and the greater demands of clients. The former Global Head of Brand in the European division at Fidelity, one the world’s largest financial managers, discusses the challenges involving new strategies to differentiate your brand, and new business models.

The Current Challenges of Private Banking and the Keys to Effective Business Communication

The private banking business in Spain continues to be an appealing niche for the financial sector. According to the consulting firm DBK, at the end of 2017 assets under client management with financial assets of at least 300,000 euros amounted to 450 billion euros. This grouping consists of almost 400,000 people, mostly residents of large urban centers of autonomous communities with higher levels of wealth per capita, commonly known as the “golden triangle” (Basque Country, Navarre, Cantabria, Valencian Community, Catalonia, Madrid).

Strong Investment in Resources

The majority of suppliers set 500,000 euros as the minimum threshold that allows them to provide a specialized offering in products, tools, equipment, relationship managers, and even offices, to their clients with a higher level of capital. The search for an efficient and profitable model is the cause of this limitation.

Private banking customers provide high margins both on and off the balance sheet in the income statement of their financial institutions. But they demand a personalized and very professional treatment, for their high level of financial culture and for the imperative need to trust in a contact person that in practice becomes the “director” of the strategy to be undertaken with their client’s capital to fulfill a host of particular objectives, such as the time horizon, risk profile, assets and preferred markets, inheritance, shareholding structure of the family group, tax optimization, profitability of their investments, among others…

This obliges relationship managers to demonstrate a high level of financial expertise and quality in their services, maintain awareness of regulatory changes, use advanced technology to manage all areas required by their client and coordinate specialized teams that provide the individualized solutions. Only in this way can a stable and long-term relationship with each client be strengthened.

This means that capturing and gaining the loyalty of a private banking client requires a large investment in resources for any financial operator. This is because it is essential to have a value proposition that is global, tailor-made, differentiated and independent, with the focus placed exclusively on the interests of the client.

Business Models

In Spain, the private banking business is still dominated by the large commercial banking brands. According to DBK, they manage 77% of the total assets in this segment of clients, compared to the 23% held by specialized operators. Universal banking has a great advantage over the rest: it can share resources in serving several customer segments, therefore lowering costs. What resources? Above all, those intended for corporate activities (HR, financial management, products on the balance sheet, technology …), and commercial activities (branch network, business growth objectives).

But this advantage can turn itself into a disadvantage. Because in practice, in universal banking, it is more difficult to build loyalty for the type of client that puts trust in personalized services with a partner, since they value less aspects of the service such as digitization, achieving profitability for their investments, among others.

The greatest attraction universal banking has for this type of client is the strength and solvency of the brand, garnering trust for an institution that due to its size and strength of its balance sheet is conceivably not in danger of decapitalization.

Private independent banking, however, can a priori better meet the demands of an exclusive service and quality, although this requires making heavy investments in resources to materialize. Even more so in the current regulatory environment, which after the entry into force of Mifid II, reduces the prospects of income generation and increases costs.

The Effect of Mifid II

The objective of the European directive Mifid II’s implementation is to strengthen the investor and client protections of financial products and services. The regulation covers many areas of activity: product governance, listing and defining the services that can be provided -management, advising, information, marketing, execution-, customer reporting, advanced training of suppliers, transparency in costs, monitoring processes and optimizing investments …

The impact on the private banking business is, therefore, enormous. To the point that the sector considers Mifid II as an opportunity to reorganize business models, since it must adapt most of its activities (and with it, the predicted of costs and revenues) to this new way of working.

At this point, we can see the dilemma between independent advising, for which the client pays a recurring fee and can access the whole universe of marketable financial assets with the recommendations of his/her advisor, as opposed to dependent advising, where the advisor recommends assets to the investor and charges fees from the manufacturer for those that his client has purchased within a limited universe of products (provided that requirements are met in terms of transparency in revenues and costs, and quality of service),

Technology is fulfilling its role as a tool to expedite the implementation of Mifid II requirements, achieving the greatest possible cost savings. It is even allowing private banking models to supported by automated management and / or advising to emerge, aimed at larger quantities of capital, without the help of relationship managers in order to reduce expenses.

The Role of Specialized Communication

However, any business model in private banking must rely on a personal relationship between the client and his/her manager, so that  the objectives of efficiency/profitability and growth are achieved. These are challenges that only with customers with 100% loyalty and with all the financial and equity needs satisfied by their service provider, can be achieved.

The role of specialized financial communication is key to helping each operator optimize its regulatory adaptation and business growth strategies. It certainly helps to position each brand with its strengths, whether its structure is that of a universal bank with specialized teams and areas, or whether it operates on exclusive and independent private banking models, or even other non-banking models. The secret of success in building loyalty is to provide a global service tailored to each client, which can be achieved so long as the differentiating strengths of its service provider’s brand are perceived.

Private banking is a service that manages the integral relationship of the client with his/her financial service provider: the needs of advising and management for his/her capital, the needs of fiscal optimization, the needs of transactionality and financing needs. Communication becomes, therefore, a tool that transmits the differentiating value chosen by each private banking provider, and the key to its success within the strategy of customer loyalty and business growth.


Javier Ferrer
Director of Financial Communication at Proa Comunicación

Communication, a valuable tool for managers and investors in Private Equity

The good times that the Private Equity (PE) sector is currently experiencing, both in Spain and at a global level, signifies an opportunity to add value for Financial Communication. Because PE is an asset with great competitive advantages: it generates constant business for managers or General Partners, high returns for investors or Limited Partners, and solutions for companies with financing needs and capacity improvement.


PE consists of very long-term investment in unlisted companies, both when they are in their initial phase/startups – in this case it is known as Venture Capital – or in more mature stages.  It is carried out in four phases: fundraising, investment disbursement, maturation, and divestment.

Investors are preferably institutional (pension funds, insurance companies, family offices, sovereign wealth funds, etc.), or large investors in the private banking segment. PE is considered an alternative asset, which brings stability to the portfolio, and yields higher than equities and fixed income.

Advantages and key figures

PE has a medium/low correlation with the economic cycle, so it benefits from low rate environments that lead to low returns in equities and fixed income. The optimal return/risk profile and its high diversification protect the investor against volatility. And as with traditional management, the expertise of managers is key in the choice of companies, sectors, or trends in the economy, with sufficient growth potential to materialize in attractive returns on divestment.

The figures show that the Private Equity is doing well in Spain and the rest of the world. According to the latest report presented by Funcas, in our country, since its introduction in the mid-1970s, investment commitments amounting to 44 billion euros have been executed. The expectation for this year is to reach 6 billion euros.  The sector has been growing at rates of 10% since 2000.

Globally, the volume invested reaches 2.7 trillion dollars, a figure that represents 3% of the valuation of the equities markets.  In 2018 alone, PE investment vehicles have raised $680 billion in fundraising processes, and there are $628 billion that Limited Partners can reinvest after the execution of divestments (known as dry powder).

The role of communication

During the fundraising stage, the investment policy, the maximum volume of commitments or the remuneration of the management team are established. The investor expects the fund manager to be successful, and the fund manager needs a certain amount of patience in order to have flexibility and to be able to choose the strategies, assets or sectors of the PE fund that will bring this success.  Therefore, there must be a complete alignment of interests between the two.

In this context, the role that the Communication can play is very important. In principle, as an informative tool of the advantages of PE, an asset still little known among the general public. And, above all, for General Partners to achieve the necessary alignment with the interests of Limited Partners during the initial phase of the investment.

General Partners know when, how much and how they will generate value in each vehicle they manage. Communication will help them strengthen brand awareness with the qualities that will solidify Limited Partners’ trust. At the time of divestment, the Communication will export the achievements obtained, and the strategies used, improving the corporate reputation of the manager.

In the case of Limited Partners, the Communication will help to position them among their clients, and in the sector, as selectors of the most efficient and effective managers in their task of optimizing investments. Managers who have achieved successful PE investments will be identified by Limited Partners as the best experts in designing and executing optimal investment strategies.

Finally, companies that have benefited from an investment in PE, can rely on communication to improve their brand image, transferring to their customers and potential public the improvements and new business strategies they have implemented thanks to PE.

Javier Ferrer
Proa Comunicación Consultant specialized in the financial services industry