How to Improve Satisfaction With Investor Relations Software

Using an investor relations software to support LP relationships is a challenge experienced by almost all private equity firms right now. This point is illustrated in the Ernst and Young Annual Global Private Equity Survey.

The other day, I was on a call with a firm that invests in the management companies of large, premier GPs and helps them to address strategic operational priorities. They had downloaded our Investor Experience guide because, in their words, “The bulk of what we hear about from our GPs is how much they’re struggling with the ability to properly service their LPs and how they’d like help understanding what technology is out there to improve that.” 

Technology transformation and improved investor reporting are still top-priority items for CFOs and the value of technology and its role in investor relationships is more widely recognized each year.

What are your top priorities for an investor relations software?

Source: EY Global Private Equity Survey

Many firms understand that technology investment can improve margins. And it seems that firms are adopting technology to manage fund accounting and investor relations.

Which of the following actions have you taken to mitigate margin erosion of your management company?

Source: EY Global Private Equity Survey

In fact, much of the technology innovation is being realized in the investor reporting side of the business. According to the survey results, private equity managers continue to focus on enhancing the investor experience with better reporting through portals that improve the level of access to information.

In which areas did you make investments in investor relations software in the past three years?

Source: EY Global Private Equity Survey

How do you share your portfolio information with clients?

Additionally, respondents to the EY survey report that they will “use business intelligence and application programming interfaces (APIs) and data feeds to provide information to clients in the coming years, even if they are not using these tools today. “

And respondents believe that “leveraging these new solutions will be paramount to support investor satisfaction in accessing timely information via a format that meets their preference.”

Private equity CFOs recognize the importance of investor satisfaction, as 20 percent more CFOs recognized changing investor preferences as a top risk facing the industry. As a result, changing investor preferences now ranks as a top-rated risk along with talent attrition.

What are the most critical risks affecting the private equity industry over the next five years?

Source: EY Global Private Equity Survey

However, firms report that they haven’t yet seen a return from technology investments.

What is the overall impact to date of technology investments on operating expenses?

Source: EY Global Private Equity Survey

This is where the opportunity exists.

The industry agrees—technology is a powerful tool to improve the investor experience. And, providing excellent investor management and reporting is critical to a firm’s success. But there are real challenges to implementing systems and managing change in order to get full value out of the investment in technology.

This is the key. While most firms plan to adopt technology in order to strengthen investor relationships, there isn’t a clear path to successful implementation.

To differentiate, your firm must be able to effectively implement technology and realize real impact. Deciding to invest in technology is just the first step. Systems implementation, configuration, integration across systems and departments, and education and training of the firm and its investors are critical pieces to the puzzle.

Over the next couple of weeks, we’ll discuss the steps required for successful implementation and provide examples of what it looks like when a firm effectively implements and uses technology to support its LP relationships.

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.

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