As the financial world becomes more complex and client expectations evolve, it’s paramount for investment managers to know how their clients view them and continually refine their approach to meet their expectations. Against this backdrop, AppFolio produced the 2023 Real Estate Investor Report, which surveyed investors on how they view the investment management companies that they work with.
Here are some key takeaways from the report.
What investors look for when choosing an investment manager
There’s a lot to consider when choosing an investment manager, and it’s a decision that can have far-reaching implications on an investor’s ability to achieve financial objectives and secure their financial future.
A combined 57% of survey respondents reported knowledge of real estate markets and financial expertise as the primary reason they invest with a specific investment management company. When evaluating potential investment managers, the data shows track record, investment strategy, fees, and management team to be the top considerations for potential clients.
In today’s digital-first world, investors increasingly expect their investment management companies to harness cutting-edge technology that offers seamless access, real-time data, and personalized interactions. The bar is set high for investment firms to deliver tech-driven solutions that resonate with the modern investor’s need for efficiency and informed decision-making.
Our data shows that 77% of investors require an online investor portal to track their investments in real-time and on demand. Meanwhile, 69% of survey participants want their investment portal to be mobile-friendly. This is a significant increase from the results of our 2021 Real Estate Investor Report, where 55% of respondents said a mobile-friendly investor portal is important.
The research uncovered that in addition to portfolio performance, investors want to receive information about upcoming investment opportunities and trends.
When asked “what types of information would you like to receive from your real estate investment management company?” investors cited updates on portfolio performance (66%), new investment opportunities (64%), and specific information on certain properties (62%) almost equally.
Trust and likelihood of recommendation
Trust between investors and their investment managers is a fundamental aspect of the financial services industry, often reflected in the likelihood of clients recommending their investment manager to friends and colleagues. Our data, however, shows there’s significant room for investment managers to improve trust levels, and as a result, the likelihood of clients recommending their services to friends or colleagues.
We asked survey participants to rate their level of trust in their investment manager on a scale of 1 (not at all) to 7 (a great deal of trust). In 2023, the average was 4, signaling that while there is some trust, there’s still significant room for improvement. We also found that while fewer younger investors are willing to actively promote their investment manager, older and higher-net-worth investors are more likely to do so.
Investment managers can improve trust among younger clients by actively engaging with them through digital platforms, offering transparent and personalized services, and demonstrating a commitment to socially responsible investing. This resonates with the values of the younger generation and encourages them to share their positive experiences.
Timely and consistent communication
Timely and consistent communication stands as the bedrock of a healthy relationship between investment managers and their clients. As such, the importance of clear and ongoing dialogue can’t be overstated — it influences client satisfaction, retention, and the success of your investment management business. However, survey respondents report being only somewhat satisfied with the transparency of the information they receive.
The survey found 69% of investors with a net worth of less than $5 million are satisfied with how transparent their investment managers are with them, while 68% of investors with a net worth of more than $5 million are satisfied.
Satisfaction with performance reporting fared better among investors with a net worth of less than $5 million. Of this cohort, 78% reported being satisfied, while just 65% of investors with a net worth of over $5 million reported being satisfied with their investment manager’s performance reporting.
Investment managers can ensure timely and consistent communication with their clients by leveraging digital tools for regular updates, employing client relationship management systems, and establishing a structured communication calendar that aligns with clients’ preferences and significant events.
Responding to market changes and economic uncertainty
2023 was punctuated by rapid market shifts and economic unpredictability, rigorously testing investment management companies’ ability to adapt and respond. Nevertheless, investor satisfaction was very high regarding investment managers’ response to market uncertainty and changes. The survey found 89% of participants are satisfied or very satisfied, up from 84% in 2021.
By embracing technology for real-time analytics and risk assessment, along with maintaining transparent and educational communication with clients, investment managers can continue to build trust with their clients and be agile and responsive to ever-evolving financial conditions. Adapting to individual client needs with personalized investment strategies and adhering to ethical practices can also go a long way in fortifying these relationships.
The data points and solutions discussed in this article barely scratch the surface of what you’ll discover in our 2023 Real Estate Investor Report. Check out the full report for more insights that can help you better meet clients’ expectations and grow your investment management business. You can download the 2023 AppFolio Real Estate Investor Report here.