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A large number of U.S. asset management firms are under spending on client services, resulting in significantly higher outflows of separate account assets, according to Greenwich Associates' 2005 Competitive Challenges Benchmarking Report, which studied 58 U.S.-based organizations. Asset outflows in 2004 increased from 12 percent to 16 percent as a result of low-quality client service and, to a smaller extent, increased manager turnover and reallocations, Greenwich Associates reports.

The typical asset management firm spent only 4 percent of operating expenses on client services in 2004, the study notes. By comparison, other drivers of firm profitability -- such as sales, executive management and marketing -- account for 8.4 percent, 7.4 percent and 5.4 percent, respectively. <<<