Client Service and Asset RetentionBenchmarking Survey

Project Description and How to Access

2

Background

Working in partnership with Pensions & Investments, in December 2009 and January 2010, Eager, Davis & Holmes (EDH) conducted a benchmarking study on client service practices and standards in the U.S. institutional investment management industry. This benchmarking study represents a continuation of research EDH has periodically conducted on client service practices in the institutional asset management industry since the late 1980s.

The study is designed to help investment management organizations more effectively evaluate and compare:

• Use and effectiveness of various asset retention practices and activities

• How client service is organized

• Client service communication practices, resource levels and productivity

• Trends in client service – particularly in light of the 2008/2009 credit crisis

3

Method

Participants completed a questionnaire focusing on:

• Client servicing organizational approach• Client service staffing levels and productivity • Client communication practices• Activities directed toward improving asset retention

To ensure accuracy, each manager’s submitted data was reviewed by our staff to identify outliers and inconsistencies. Incorrect data was adjusted or eliminated. Questionnaire responses were then entered into our Benchmarks Database for this analysis.

Questionnaire information from each firm remains strictly confidential and is used only for the purpose of developing universe information.

All data shown in this report is for the period ended September 30, 2009, unless otherwise noted.

44

Sample Characteristics

In total, 56 institutional investment managers participated in this study. Participating managers were required to have at least $2B in institutional assets under management.

Following is a summary description of the 56 participants:

Participants in aggregate had over $2 Trillion in institutional assets under management as of September 30, 2009

Participants in aggregate had over 20,000 institutional clients as of September 20, 2009

Participants’ assets under management were distributed across numerous client types; including Defined Benefit, Defined Contribution, Endowment/Foundation, and Subadvisory

On average, 78% of participants’ institutional assets were invested in either active equity products (41%) and/or active fixed income products (37%)

5

Three Levels of Consulting GuidanceYour firm has three options for accessing EDH’s 2010 Client Service Benchmarks research and using it to strengthen your firm’s client service program:

Level: Description:

1. 2010 Client Service and Asset Retention Benchmarks Report

Data Version

This report presents tabulated results of EDH’s most recent industry benchmarking study on client service:

• Free to study participants• $750 for non-participants

2. 2010 Client Service and Asset Retention Benchmarks Report

Analysis and Conclusions Version

A more detailed report that includes EDH’s assessment and conclusions of practices that lead to better client retention:

• $750 for study participants• $1,950 for non-participants

3. Client Service Program Strategic Evaluation Completing over 130 client service-oriented projects for investment managers combined with our ongoing client service benchmarks research makes EDH a thought-leader on client service best practices. We know client service practices that lead to strong client relationships that weather the ups and downs of the performance cycle.

In a Client Service Program Strategic Evaluation, EDH evaluates your firm against industry best practices in client service. You are provided with detailed recommendations for improving and/or building-out your client service program.

Please contact us to discuss how we can help strengthen your client retention and cross-selling success:

Dave Eager 502 657 6477 deager@eagerdavisholmes.comGlenn Davis 502 657 6478 gdavis@eagerdavisholmes.comDavid Holmes 502 657 6479 dholmes@eagerdavisholmes.com

Survey Questions

6

H

elping investment m

anagers win and retain assets

9900 Corporate C

ampus D

rive, Suite 3000 . Louisville, KY

40223 P: (502) 657-6477, 657-6478, 657-6479 . F: (502) 657-6326 . eagerdavisholm

es.com

C

lient Service and Asset R

etention B

enchmarking Survey

Decem

ber 2009

• Participating investm

ent managers receive a com

prehensive report that helps you com

pare your firm’s client service resources and activities to those of other

institutional investment m

anagers. •

Your answ

ers will be kept strictly confidential. O

nly aggregated data will be

shared. •

Estim

ated time required for com

pletion: 20 to 30 minutes assum

ing you have the required inform

ation at hand. •

Please provide the following inform

ation so that we can contact you to clarify

answers if needed:

Firm N

ame:

Contact N

ame:

Telephone N

umber:

E-m

ail:

• Please return your com

pleted questionnaire by Decem

ber 16. Send via fax to 502 526 4275 or em

ail to dholmes@

eagerdavisholmes.com

We suggest you save a

copy of this questionnaire to facilitate comparison to aggregated survey results.

For questions, contact:

David H

olmes

Phone: +1 (502) 657 6479 E

-mail: dholm

es@eagerdavisholm

es.com

Instructions

Please provide answ

ers specific to activities in North A

merica.

The study focus is servicing institutional clients. W

ords defined below appear in

italics in the questionnaire text.

Please answ

er any time-sensitive questions (staffing levels, assets under m

anagement,

etc.) as of September 30, 2009.

Definitions [D

efined terms appear in italics throughout the survey]

Institutional Clients. M

ay include retirement plans, charitable organizations,

endowm

ents, foundations, corporate balance sheet assets, insurance company assets,

bank assets, separately managed accounts, and subadvisory assets. This study specifically

excludes high net worth (w

ealthy individuals) and retail assets.

Institutional Client Service. Includes all direct com

munication, reporting and service for

the institutional fund sponsor or client. Excludes ancillary services such as DC

participant services/com

munications, D

B actuarial services/paym

ents, back office administration,

etc.

Primary C

ontact. Individuals in your organization who have prim

ary first line responsibility for understanding and m

eeting the needs of clients specifically assigned to them

. Depending on your servicing m

odel, the primary contact m

ay be a relationship m

anager, portfolio manager or sales person.

Product Specialists. Individuals who serve as a liaison betw

een the investment group and

prospects/clients/consultants for a specific product or product group.

Professional Staff. Senior level positions responsible for client managem

ent, m

anagement of a servicing function, or having responsibilities that require advanced

training and experience.

Relationship M

anager. Individuals primarily responsible for client account m

anagement

(conducting/ attending review m

eetings, providing updates, responding to client needs). Som

e firms do not have individuals in this function because their sales persons or

portfolio managers perform

this role.

Sales persons. Individuals primarily responsible for direct selling to prospects,

consultants, and/or clients. They may have servicing responsibility for the accounts they

win.

Support Staff. Positions performing clerical, adm

inistrative or secretarial duties.

Background Inform

ation 1. Please provide the follow

ing information pertaining to N

orth Am

erican client servicing business activities as of Septem

ber 30, 2009, or using the most recently

available data (indicate date below). N

ote: Please ensure the time fram

e in which you

answer the questions is consistent throughout the survey.

Num

ber of Institutional Clients

Institutional A

ssets Under M

anagement

(Million $)

If data not as of 9/30/2009, indicate date (xx/xx/xxxx)

2. Approxim

ately what percentage of your institutional client assets fall in each of the

following categories?

% R

etirement assets: defined benefit

% R

etirement assets: defined contribution

%

Endowm

ent/Foundation

% Subadvisory

% Insurance com

pany (general account) assets

%

Other : W

hat? 100%

3. A

pproximately w

hat percentage of your institutional client assets fall in the following

categories?

% A

ctive equity %

Active fixed incom

e %

Indexed or enhanced index products %

Hedge funds

% Private equity

% M

ulti-asset mandates (target date funds, broad m

andates) %

Other

100%

4. Approxim

ately what percentage of your total new

assets gained for the year ending 9/30/2009 (or other date indicated in Q

uestion 1) came from

existing clients (including both cash flow

and cross sales)? %

5. Approxim

ately what percentage of your institutional clients use only one of your

firm’s products? Tw

o products? Three? Four or more?

O

ne

%

Tw

o

%

Three

%

Four or more

%

Total

100 %

6. Do you have client service goals (e.g. asset retention, cross sales) that are stated in

writing and w

idely understood throughout your organization?

Yes

N

o

7. Do you have a client service strategy or plan that is stated in w

riting and widely

understood throughout your organization?

Yes

N

o

Servicing Structure/R

esources

8. How

many em

ployees have job responsibilities that are primarily dedicated to

institutional client service, including both professional and support staff?

Professional Staff

Support Staff

Total

9. To what degree has your client service staff count changed over the past tw

o years? [C

HO

OSE O

NE]

Up 20%

or more

Up 5 to 20%

W

ithin 5% of tw

o years ago D

own 5%

to 20%

Dow

n 20% or m

ore

10. Which type of individual m

ost often serves as your clients’ primary contact, that is,

the person responsible for understanding and meeting each client’s needs? [C

HO

OSE

ON

E] Relationship M

anager Sales person Portfolio M

anager Product Specialist O

ther

11. [If your firm uses relationship m

anagers as the primary contact] W

hat percentage of your relationship m

anagers hold a CFA

? [CH

OO

SE ON

E]

Below

25%

26%

to 50%

51%

to 75%

76%

to 100%

12. [If your firm uses relationship m

anagers as the primary contact] Specific to your

relationship managers, w

hat is their average years of experience in the institutional investm

ent industry? [CH

OO

SE ON

E]

2 years or less

3 to 5 years

6 to 10 years

More than 10 years

13. [If your firm

uses relationship managers as the prim

ary contact] Which of the

following factors are used to evaluate your relationship m

anagers’ job perform

ance and influence their compensation and/or incentive bonuses?

[CH

OO

SE ALL TH

AT A

PPLY]

Firm

profitability

C

ross sales

C

lient or asset retention

C

lient-based revenue

C

lient satisfaction measures

Other specific service objectives

Subjective evaluation

O

ther

14. To whom

does your head client service officer report? [CH

OO

SE ON

E]

Reports to:

Head of Sales and Service

Head of M

arketing and Service H

ead of Marketing, Sales, and Service

Chief O

perating Officer

Chief Investm

ent Officer

Chief Executive O

fficer O

ther W

hat?

15. Does your firm

use product specialists that play a role in client servicing? N

o Y

es

16. Please answer the follow

ing questions regarding the individuals who serve as

primary contacts to your clients:

a) What is the approxim

ate average number of clients assigned to each individual

(his or her account load)? b) W

hat is the approximate average num

ber of face-to-face servicing calls made by

typical primary contact person at your firm

in a one-year period for each purpose listed below

? Form

al review m

eetings Inform

al meetings

Entertainment/social

Hosting visits to your firm

O

ther Total

Client Inform

ation Managem

ent/Com

munication

17. Please list the client relationship managem

ent (CR

M) system

(s) you use. [LIST ON

E IN

EAC

H A

NSW

ER FIELD

AS N

EEDED

] a) b) c) d)

18. Rate your satisfaction w

ith each software/system

listed above using a scale where “5”

is “very satisfied” and “1” is “very dissatisfied.” [ASSIG

N R

ATIN

G TO

EAC

H O

NE

USED

; AN

SWER

“18a)” CO

RR

ESPON

DS TO

THE SY

STEM N

AM

ED IN

“17a), ETC

.] a) b) c) d)

19. Do you “tier” or “segm

ent” your client service, i.e., intentionally define and provide higher or low

er levels of service, contact, or comm

unication to certain segments?

No

Yes

(If yes) How

many tiers/different service levels do you have?

(If yes) On w

hich characteristic(s) do you tier? [CH

OO

SE ALL TH

AT

APPLY

]

A

ccount size/revenue

Fund size (client’s total assets)

Total revenue potential

C

lient needs, expectations, or levels of sophistication

C

lient satisfaction level/clients at risk

Fund type (corporate, public, etc.)

Location

C

onsulting firm used

Other

What?

20. For each applicable asset class, please tell us how quickly (in num

ber of working

days) after the “close day” you provide your monthly and quarterly reporting

package to your “typical” clients.

Num

ber of Working D

ays after Closing D

ate M

onthly Reporting Q

uarterly Reporting

• D

omestic Equity

•

Fixed Income

•

Int/Global Equity

• A

lternative Investments

21. Approxim

ately what percentage of your institutional client base, if any, receives

customized (non-standard) reporting? %

22. Which of the follow

ing are you currently providing to institutional clients via “hard-copy” delivery? V

ia Email? V

ia your Web site? [C

HO

OSE A

LL THA

T APPLY

]

Hard C

opy? Em

ail? Website?

Perform

ance reports

Performance attribution

Asset/transaction statem

ents

Investment/econom

ic outlook

A

sset allocation advice

O

rganizational developments

RFPs

Investment education/w

hite papers

A

udio presentations

Video presentations

Other

None of the above

If you answ

ered “other,” what?

23. Which of the follow

ing other methods of client com

munication does your

organization use on a regular basis? [CH

OO

SE ALL TH

AT A

PPLY.]

Client conferences

Web casts/W

ebinars C

lient round tables or issue-focused discussions C

lient educational group meetings

Hosting visits to your offices

Audio conferences

Video conferences

24. A

pproximately w

hat percentage of your institutional clients have seen the following

individuals in a formal or inform

al meeting over the past year?

Portfolio Manager %

C

hief Investment O

fficer %

Chief Executive O

fficer %

25. Does your firm

require the primary contact for each account to develop a specific

written account strategy or plan for each client? N

o Y

es

25a. If yes, is each account strategy/plan periodically reviewed by a higher level

staff mem

ber, such as the head of client service or head of sales and servicing? [C

HO

OSE O

NE]

No, none is periodically review

ed Selected account strategies/plans are review

ed Y

es, all are periodically reviewed

25b. If yes, how often are they review

ed? [CH

OO

SE ON

E] M

onthly Q

uarterly A

nnually Less often than annually They aren’t review

ed

Asset R

etention Activities

26. Please estimate the percent of your institutional clients having appropriate

performance expectations for your products that they invest in. [C

HO

OSE O

NE]

B

elow 25%

26% to 50%

51% to 75%

76%

to 100%

27. Focusing only on accounts your firm

has lost due to performance reasons:

Measuring from

the point in time w

hen the client first voiced concern about perform

ance, approximately how

much longer w

ere you typically able to keep the client before you w

ere terminated? [C

HO

OSE O

NE]

Less than six months

Six months to one year

One to 1.5 years

1.6 to 2 years M

ore than 2 years

28. Which of the follow

ing asset retention activities: a.

Does your firm

currently engage in? b. D

o you find effective in asset retention? [CH

OO

SE ALL TH

AT A

PPLY IN

EA

CH

CO

LUM

N]

a) Use? b) E

ffective?

Providing higher service levels to clients “at risk,” (dissatisfied clients)

C

ross selling toward clients at risk

Increasing visits to clients at risk by senior investment personnel

Visits to clients at risk by C

EO

Developing and im

plementing account-specific strategies/plans

Promoting client contact w

ith others at your firm beyond the

relationship m

anager

D

eveloping relationships with other contacts at the client organization

Ensuring clear and repeated com

munication of your investm

ent

approach and perform

ance expectations

Providing advice on investm

ent topics beyond your specific role

Hosting non-w

ork related events

Third party client servicing audits/assessments of best practice

Periodic training for client servicing personnel

Accessing client satisfaction survey data that is gathered for a large

number of investm

ent managers in one survey

Conducting a client satisfaction study exclusively for your firm

that is adm

inistered by an objective third party

C

onducting a client satisfaction survey administered by your internal

staff

Lost client interview

s

29. Com

pared to two years ago, please indicate w

hether the following aspects of

institutional client service have decreased, increased or not changed significantly. [C

HO

OSE O

NE FO

R EA

CH

ASPEC

T] No N

o

Decreased C

hange Increased Opinion

Account loads

R

eliance on technology

“Face tim

e” with clients

Your firm

’s focus on cross selling

C

lients’ openness to cross selling

Y

our senior managem

ent’s involvement in service

Your investm

ent staff’s involvement in service

Consultant’s involvem

ent in service to your clients

Im

portance of providing solutions for clients

Importance of developing relationships w

ith clients

30. W

ho at your firm takes the lead in com

municating w

ith field consultants who are

serving your clients? [CH

OO

SE ON

E]

Our consultant relations team

Our client service/relationship m

anagement team

Other:

Thank you for com

pleting this survey. Your responses w

ill be kept strictly confidential and used only in com

bination with responses of other organizations to identify com

mon

practices and trends. 31. M

ay we include your firm

’s name w

ithin the report as a study participant? Y

es N

o