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Building Relationship Capital
Client Relationship Management for The Capital Markets
Executive Summary
Current market trends in both investment banking and equity sales, trading, and
research demand a rapid and sophisticated response, not just in terms of corporate
strategy, but in the technologies and processes put in place to support these strategic
moves. This white paper explains the role client relationship management (CRM)
technology can play in helping capital-markets firms streamline investment-banking
activities, increase brokerage trade volume, and meet compliance challenges. As a
nerve center for capturing information about clients, prospects, institutions, syndicate
partners, and other contacts, the right CRM system enables capital-markets firms to
share intelligence, coordinate activities, and derive optimal firm-wide advantage from
an integrated body of corporate knowledge and relationships.
As investor confidence has gradually returned following the IPO bubble of the late '90s, the capital markets have rebounded and investment banking is seeing expanded opportunities. Recent significant rises in both IPOs and M&A activity seem to portend continuing growth over coming years. Meanwhile, lines of business centered on trading have come under mounting pressure as market volatility has decreased and agency trading has become less profitable.
While the direction the markets will take is never certain, one thing is clear: it’s time for capital-markets firms to make sure they’re positioned to capitalize on new opportunities as they arise and mitigate losses in weaker business lines.
Current market trends in both investment banking and equity sales, trading, and research demand a rapid and sophisticated response, not just in terms of corporate strategy, but in the technologies and processes put in place to support these strategic moves. Firms serving the capital markets need to leverage technology to put their knowledge and resources to better use and achieve the efficiencies and synergies that streamline investment-banking activities and increase brokerage trade volume. Such technologies must also be able to support the mounting and sometimes overwhelming requirements of regulatory compliance.
Capitalize on an Undervalued Asset
A recurrent irony in the capital markets is that for an industry so adept at quantification, arguably its most valuable assets are those that are relatively intangible, even ephemeral: personal relationships. Who knows who and who knows what about whom are critical factors in bringing in investment-banking deals. Similarly, deep familiarity with institutional client interests, holdings, trading patterns, and preferences paves the way to better research dissemination and increased trade activity. But in both these settings, if information and relationships are leveraged only at an individual level, the firm fails to realize their full potential value.
Not surprisingly, then, client relationship management (CRM) technology holds tremendous promise for capital-markets firms. As a nerve center for capturing information about clients, prospects, institutions, syndicate partners, and other contacts—not to mention the deals, IPOs, mergers and acquisitions, portfolios, and trades associated with them—the right CRM system enables capital-markets firms to share intelligence, coordinate activities, and derive optimal firm-wide advantage from an integrated body of corporate knowledge and relationships.
CRM in the Capital Markets:
The Secret to
Higher Performance
Above all else, client relationship management is a business strategy designed to realign organizations to focus more clearly on their clients; CRM systems are merely the technology tools that support and enable this client-centric strategy. Implementing a CRM strategy involves a shift in the way a firm views the value of its clients and relationships. The effective combination of CRM strategy and technology results not only in higher client satisfaction and retention, but in significant organizational efficiencies and benefits.
In the capital markets, where relationships and information are currencies unto themselves, the advantages of such an approach are readily apparent. Simply put, basic contact management is insufficient to map the complexity inherent in investment-banking relationships; nor does it address the need to collect and track associated activities, information, and documentation. In many firms, this leads to an inefficient and disjointed assemblage of spreadsheets and files scattered across the organization. By contrast, the absolute foundation of CRM is the creation of a rich central repository of in-depth information about clients, contacts, targets, opportunities, and deals that is accessible to all applicable personnel, promoting not only a culture of collaboration and information-sharing, but the acquisition of deeper strategic insight. Furthermore, centralizing this knowledge helps eliminate information silos and bottlenecks, while also ensuring that critical data and relationships accrue to the firm, not just individuals, developing a “corporate memory” that survives staff turnover and organizational change. A CRM system is not, however, merely a sophisticated electronic filing cabinet. It is a critical hub for all client interaction and activity, both for investment bankers and sales, trading, and research. On both sides of the business, success is a function of bringing the right information, people, and skills together at the right time. The ability to do so is contingent on both the quality and the accessibility of the information contained in the CRM system. By using the CRM system as both the launching pad and the closing point for all client-related internal and external activity, capital-markets firms ensure that the system contains a record of all touch-points and acquired intelligence, making it easy to rapidly track down information such as deal criteria or institutional-client holdings and interests. This information, in turn, can be used to complete deals more efficiently and deliver timelier, more relevant research and information to institutional accounts.
With the entire working group or transactional triangle using the same centralized information and tools to do their jobs, a CRM system becomes much more than an information source—it becomes a collaboration vehicle. Advanced CRM systems include valuable workflow functionality that capital-markets firms can use to coordinate the activities of internal and external stakeholders, eliminating duplicate effort, streamlining processes, and significantly increasing productivity. Moreover, CRM systems can drastically reduce the time and effort required to complete tasks such as mass mailings to segmented lists, instantly personalizing large communication blasts directly from CRM data.
Perhaps most importantly, CRM systems give
capital-markets firms the depth of client knowledge and insight into their own operational performance required to make the leap from being reactive to being proactive. CRM reporting tools help executives track performance, value, and trends for better planning and resource allocation. Call plans and other relationship-building tools help firms consistently follow client-management best practices and nurture relationships on an ongoing basis to facilitate new client acquisition. Deeper understanding of client histories and behaviors assists in better matching of clients with future deals, trades, and research. This ability to gain and leverage strategic insight, more than anything, will separate the wheat from the chaff in st-century investment banking.
CRM in Investment Banking:
The Key to Better
Deal Management
With mergers and acquisitions and IPO activity again on the rise, investment bankers need to act fast to capitalize on expanding opportunities and grow their competitive position in the market. As the number of potential deals increases, however, so does the number of players and the difficulty keeping track of large volumes of deal information and complex networks of relationships. Investment banks seeking competitive advantage in corporate finance need to act strategically, leveraging every contact and piece of information available to them.
Leverage Shared Knowledge
to Increase Productivity
Despite the central role that relationships and deal information play in corporate finance, a staggering number of investment banks continue to rely on haphazardly distributed spreadsheets and outdated, limiting contact-management tools to track deals and relationships—barely a step up from the guarded personal Rolodex of yesteryear. In today’s investment-services environment, hoarding information is no trump card; rather, it’s a surefire way to stymie a deal. To effectively investigate an opportunity or manage a deal, the entire working group needs to join forces and share knowledge, collaborating to close the deal and serve the client’s needs. To do this effectively, they need a system and tools designed to facilitate this very specific interaction model.
A robust CRM system tailored to investment-banking needs provides the answer. By centralizing all of the information about a firm’s contacts, companies, consultants, and partners, and combining it with information and documentation about historical, current, and upcoming deals, a CRM system becomes the nexus of all strategic and tactical deal activity within the firm.
Untangle the Relationship Web to Make
the Connection
With the ability to track and model multi-dimensional relationships in an easy-to-understand manner, a CRM system can give investment-bank personnel instant, at-a-glance insight into the complex network of stakeholders and relationships—owners, executives, shareholders, boards of directors, consultants, lawyers, and more—involved in a firm, deal, or syndicate. This can furnish the information needed to capitalize on individual personal relationships on a firm-wide level, providing the route into new opportunities and syndicates and offering the connections needed to help close deals smoothly.
“
As customer needs and industry dynamics
shift, organizations must acquire systems and
methods that enable them to assess the true
costs and revenue of specific customers.
This will need to be done at the macro
(segment and business unit) and micro
(individual client and service opportunity) levels.
Critical to these efforts will be the ability to
store, aggregate, and analyze vast amounts of
account- and activity-based data.
”
“Client Issues for 2005: Investment Services Firms Focus on the Customer,” David Schehr, David Furlonger, Mary Knox, Lane Leskela, and Peter Redshaw, Gartner, April 5, 2005
Focus Efforts Profitably Using
Strategic Insight
CRM client and contact records can include a wealth of usable information, including all past interactions and associated documents, creating a “60-degree” client view that enables every member of the coverage team to deliver consistent, informed service to the client. Better yet, a good CRM implementation allows investment banks to achieve the depth of client knowledge needed to develop real strategic insight. By applying information such as acquisition criteria and financial data stored in the firm’s CRM system, investment bankers can quickly match acquisition targets with ideal buyers and issuers with sources of financing. Better-focused deal marketing and roadshows result in greater economy of effort and faster results at a lower cost, enabling investment banks to manage more deals while delivering improved client service and satisfaction.
Collaborate More Effectively with
Structured Workflows
Beyond relationship modeling and contact management, a true CRM system provides extensive functionality for planning, tracking, and managing activities and communications—indispensable in an investment-banking setting. This can range from scheduling regular relationship-nurturing calls and meetings with key contacts to managing the complex multi-step procedures involved in securing client financing or seeking out target companies for mergers and acquisitions. Workflow tools can help implement structured processes that coordinate the activities of multi-party procedures according to managed timelines. This delivers more predictable results while also creating consistency in deal management that ensures beneficial collaboration and adherence to best practices. In addition to helping deals come together more smoothly, CRM workflow tools take the
guesswork out of deal management, enabling executives and members of the coverage team to instantly view or report on the status of a pitch or deal to aid in analysis, forecasting, performance assessment, and planning. By using a CRM system to unify the tracking and management of activities, deals, opportunities, relationships, and syndicates, investment banks can reduce administrative burden, gain strategic insight, and ultimately turn deals more quickly, dramatically improving productivity.
CRM in Institutional Sales,
Trading, and Research: The
Upside for the Sell-side
The key benefits of CRM for institutional sales, trading, and research are simple: the more a firm knows about its clients, the more effective its salespeople can be. By centrally tracking institutional-client holdings, interests, research preferences, and trade history, the institutional sales team can react immediately to new research and instantly identify targeted recipients by investor profile, while also clearly noting which clients have already been contacted or received research, eliminating duplicate effort. Streamlined research distribution saves time, enabling the sales force to call into more institutions and initiate more trades. CRM data can be used to generate call lists in seconds, improving the firm’s speed to market and increasing trade volume. Meanwhile, the depth of client information in institutional-investor profiles helps the salesperson craft a more informed and personalized pitch, improving the odds of success. Pre-qualifying clients based on preferences, interests, and eligibility decreases wasted time and effort, allowing institutional salespeople to concentrate on the clients with the greatest sales potential.
Improve Your Client Knowledge to
Increase Your Sales
Better client insight helps develop stronger, more lucrative relationships between institutional salespeople and their clients, leading to even greater client intelligence. The more targeted and relevant the research and contact received by the institutional investor, the more trusted the salesperson and the higher the firm profile. In the event of oversubscription of hot securities, the insight into client importance and value provided by CRM records can be extremely helpful in allocating shares, enabling sales and trading to reward client loyalty and keep valuable clients happy.
“
It has been said that the key to a successful
relationship is communication. While true for a
husband and wife, it is no less relevant to an
investment bank courting potential buyers and
sellers of multimillion-dollar companies. Asking
a high-level decision maker, ‘Where did our last
meeting leave off?’ is not likely to generate the
kind of confidence that gets a deal done.
”
“Learning to Communicate,” Anthony Guerra, Wall Street & Technology, April 26, 2005
Fine-tune the Triangle for Productive
Synergies
The knowledge stored in a firm’s CRM system can dramatically improve communication and collaboration between the “transactional triangle” of sales, trading, and research. Tracking contact points, research distribution, and trade information in a single centralized location enables these time-stretched players—including the ever-traveling research analyst—to all refer back to the same, up-to-date client information and better align their efforts. Research analysts on the road can receive and respond to client-contact requests in minutes, rather than hours, increasing both client satisfaction and the chance of initiating trades. Client details can help traders identify new leads and cross-selling opportunities. CRM systems can even be used to track research-analyst visits to institutional clients, allowing institutional sales or other investment-banking personnel to “piggyback” on analyst traveling schedules to maximize opportunities.
Using a tailored CRM system that enables sales and trading to aggregate and apply client knowledge at lightning speed leads to lower costs, higher trade volume, and increased institutional-client satisfaction—returning trading to its traditional importance in capital-markets revenue generation.
Ethical Walls, Not Silos:
Why an Integrated Solution
Works Best
Client relationships are the foundation of investment-banking activity, and client information is vital to sales, trading, and research—therefore CRM is a critical technology infrastructure on both sides of capital-markets firms. In the same way that disconnected systems for tracking contacts, deals, and related documents is inefficient, the fewer client-intelligence systems a firm has to maintain, the better. Provided a CRM system offers functionality tailored to the needs of all a capital-markets
firm’s lines of business, there is no reason why a single CRM system cannot be used by the corporate finance and sales, trading, and research divisions of capital-markets firms.
The advantages of implementing a single solution are obvious: in addition to saving potentially hundreds of thousands of dollars in start-up and hardware costs at the time of implementation, the firm pays to maintain and support only one system, dramatically lowering the total cost of ownership. The same investment in technical administration skills and staff training, furthermore, carries across business lines.
The challenge, of course, is the need to maintain
information security and integrity within ethical boundaries. Capital-markets firms should seek out a CRM system built to accommodate strict role-based security and implement a solid ethical wall between lines of business. Administrators should be able to limit the depth of information viewable to the user based on his or her role—for example, only members of the working group should be able to view deal details and documents. On the other hand, general company or investor profiles and contact information can be equally useful to
investment bankers and securities brokers, so duplicating this information in multiple systems merely increases workload—not to mention the chance of incomplete or conflicting records.
A single, unified CRM system enables capital markets firms to maintain a consolidated information source and toolset that is cost-effective to administer while also wholly secure and usable across the organization.
CRM and Compliance:
Easing the Pressure
With Sarbanes-Oxley in place and SEC regulators closely scrutinizing financial-services firms, it’s not surprising that regulatory compliance is the greatest challenge facing firms that offer investment advice and services. Despite the exacting standards to which such firms will clearly be held by regulators, however, compliance rules are still insufficiently established and tested, leading to a culture of confusion and conflicting interpretation that only adds to the pressure felt by companies serving the capital markets.
The wisest solution under such conditions is for investment banks to become proactive in addressing regulations, seeking out ways to ensure that their operations align with compliance best practices. Increasingly, capital-markets firms are realizing that compliance is not an issue that can be resolved with the implementation of a single software application or business process; it is a consideration that must be woven into every technology, workflow, and process within the firm.
“
Buy-side traders say that information flow still
is a key part of the relationship with the sell
side. Speaking at the TABB Group Forum,
Jeffrey Alexander, a director of trading at Credit
Suisse Asset Management, urged brokers to
understand ‘that an algorithm is not substituting
for the relationship.’
”
“Reinventing the Relationship,” Ivy Schmerken, Wall Street & Technology, June 29, 2005
While not a compliance “cure-all,” then, a properly configured CRM system can form a critical part of a capital-markets firm’s compliance strategy. As the center for all client-related activity, the CRM system furnishes a comprehensive record of all client information and interaction. Easily entered reports describe the subject and nature of all telephone and face-to-face meetings. Meanwhile, integration with the company’s existing e-mail program (a feature offered by leading CRM vendors) enables users to seamlessly export and log their inbound and outbound client communications within the CRM system without additional time or effort, providing a complete and readily accessible record from which full e-mails can be reproduced exactly as originally composed. Other notes, activities, and documentation can be attached to client, deal, transaction, and opportunity files. Furthermore, workflow tools and activity assignments clearly delineate timelines and responsibilities, providing both a framework for
accountability and an opportunity to instill best practices. Strong security features designed to enforce ethical walls ensure that only the appropriate working-group members are able to view or add account data, protecting data integrity and preventing insider trading. Audit trails offer a failsafe method through which all changes and additions to client records can be traced and identified.
Tracking all communications and documents associated with client activity is absolutely critical in today’s compliance environment—using a CRM system to do so brings the added benefit of building client insight and facilitating teamwork while satisfying compliance requirements.
Mobile Access:
Productivity Anytime, Anywhere
The capital markets are dynamic, and likewise, the professionals who serve them are always on the move. From investment-banking teams on whirlwind financing roadshows to research analysts perpetually visiting companies, capital-markets professionals can’t afford to be chained to their desks by their need to access up-to-date information.
Mobile and wireless capabilities are thus essential CRM-system considerations for capital-markets firms. Investment-bank personnel need to be able to access and contribute to CRM data from laptops and handheld devices, anytime, anywhere—whether they’re bankers needing to refer to deal documentation while visiting potential investors or research analysts wanting to enter call reports while on a plane. Luckily, many CRM systems offer mobile and wireless features that allow users to access or add CRM data from the device of their choice. With access to a broadband Internet connection sometimes uncertain, another feature offered by some CRM systems that is of significant value to capital-markets users is the ability to operate with complete CRM
functionality and data while in a fully disconnected mode, synchronizing with the main system when reconnected— ensuring optimal productivity and performance at all times, regardless of connectivity.
Pivotal CRM for
Capital Markets™
Pivotal CRM for Capital Markets is a complete, end-to-end client relationship management system that offers exceptional functionality tailored to the needs of both the investment banking and institutional sales, trading, and research divisions of capital-markets firms—the only CRM system on the market that meets the needs of both lines of business built on a proven, enterprise-scale technology platform.
Pivotal CRM for Capital Markets creates a comprehensive repository of information regarding deals, opportunities, transactions, clients, employees, contacts, and influencers, becoming a capital-markets firm’s most valuable information hub. With tools that help manage and leverage relationships, process deals, and act on opportunities, Pivotal CRM improves collaboration and increases productivity for investment bankers. In addition, Pivotal CRM offers robust features to enhance and streamline interaction between sales, trading, and research, delivering time-sensitive data and research to the right people more rapidly. The result is faster development of new institutional clients, higher
Moving with the Markets: The Need for Flexibility
As we all know, the only constant is change. With market-structure shifts, regulatory changes, market unpredictability, competitive pressures, and other forces continuously reshaping the capital-markets landscape, you can count on the fact that your firm will need to adapt in order to deal with the plethora of changes in your business environment. To continue to be effective high performers in today’s business climate, organizations have to be agile and adaptive. Supporting your business processes with technology can make your company faster and more productive today—but you must also ensure it won’t hinder you when you need to respond rapidly to tomorrow’s changes in the market and regulatory environment.
Whatever CRM system you choose, you should ensure it is capable not only of molding to the way you currently do business, but also of adapting to change—quickly and cost-effectively. No matter how robust or powerful your CRM system, it is useless if it ties you to outdated processes and impedes your business agility. Be sure to select a flexible, easily customizable CRM system that can keep pace with your business in a dynamic business environment.
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satisfaction among existing clients, and better insight into client value and interests—all in a system that preserves data security and integrity within “ethical wall” boundaries. Furthermore, Pivotal CRM offers full mobile, wireless, and disconnected-access functionality, ensuring capital-markets professionals maintain full productivity and insight, whether in the office or on the road, regardless of Internet access. (To learn more about Pivotal CRM’s mobility features, please refer to the Pivotal CRM white paper “Pivotal CRM – Empowering the Mobile Enterprise,” available online at pivotal.com.)
Pivotal CRM for Capital Markets provides all of the standard features commonly needed by capital-markets firms and reflects a data model devised specifically for the capital markets, leading to a faster, lower-cost implementation. Built on the highly flexible Pivotal CRM platform, it is designed to be quickly and cost-effectively customized to meet individual firms’ unique needs and easily integrated with third-party systems and data sources.
A CRM pioneer leading the industry for more than 0 years, Pivotal CRM offers a suite of proven enterprise solutions that closely match the specific business processes and needs of distinct financial-services lines of business, including institutional and wholesale asset management, commercial banking, private banking, and capital markets.
Conclusion
The capital markets turn on a dime, and investment banks need to be able to keep pace. Without the proper technology bedrock—one that builds and capitalizes on the firm’s full array of resources, including client intelligence and personal relationships—no capital-markets firm can act with the velocity required to be competitive in today’s investment-services environment. But it’s not all down to speed—those who work faster must also work smarter. Precision and focus are essential to applying time and resources where they will be most effective, and they’re only achievable when a firm has the depth of client knowledge required to act strategically. CRM provides the solution on both fronts. Whether it’s through better collaboration of investment-banking working groups for smoother deal management or more timely matching of analyst research with institutional clients for higher trade volume, CRM helps capital-markets firms build their most valuable form of capital: relationship capital.
Pivotal CRM for Capital Markets gives both sides of capital-markets firms features to
improve productivity and gain strategic insight.
Leverage relationships more effectively with relationship-building tools and insight into inter-relationships Improve collaboration with automated workflows for managing deals and other complex processes Develop a competitive edge with faster delivery of time-sensitive research and information Improve client satisfaction with better-targeted service and research
Maintain information integrity with a built-in “ethical wall” •
• • • •
Use Pivotal CRM for Capital Markets for: Relationship Management
Opportunity Management Deal Management Venture Capital Investments Roadshow Scheduling
Working Group List Maintenance Reporting Buyers-List Management • • • • • • • • Company/Contact Management Personalized SmartPortals Audit Management
Executive Assistant Management Coverage Teams
Associates/Associations Employee Profiles
Ad-hoc Research Distribution • • • • • • • •
Real-time Data Feeds Security
Call Reports Research Products
Distribution Product Maintenance Distribution Management Trade Activity Power Searches • • • • • • • •
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