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External Wholesalers, Fewer In Number, Face Rising Expectations

by Eric Daugherty

In December, kasina released Excellence in Distribution: External Wholesaling. We found that diminished brand loyalty and reduced assets have changed advisors' expectations of wholesalers. At the same time, firms' financial imperatives caused them to reduce both the number of and compensation packages of external wholesalers. These tensions make the present an opportune time for firms to review how they staff and deploy their sales forces.

When it comes to optimizing wholesaling, firms really have four key levers they can pull:

• Sales Force Structure and Selling Process


• Territory Management


• Compensation


• Technology Deployment

In essence, these boil down to: getting the right number of the right people spending their time on the right things, deploying them intelligently against the client/prospect base, giving them the right incentives, and the right tools to work with. Of course, this is what firms should always be striving to do. Yet, we found quite a few sub-optimal practices.

Notably, firms still have too many externals, relative to more affordable hybrids and internals. Yet, despite the fact that externals are an expensive resource, firms get only 57% of their time facing the client, with the other 43% is spent on travel, meetings, and other administration (best practice firms manage to have 70% of time facing clients).

When it comes to territory management, firms spread externals over territories that are too large, which inhibits focus. Many firms still rely on channelization, which may no longer be cost-effective.

On the compensation front, externals are still driven by huge sales commissions. Firms would be better served by driving compensation via discretionary bonuses that are tied to firm profitability or activities that add value over the longer term.

Our FA Vision study and our What Advisors Do Online research indicate that advisors' needs and desires are changing - they are more interested in the quality of wholesaler contact vs. quantity; they are more open to technology solutions to access information and services; and, their time is more at a premium than ever.

Given all that is in flux, firms have an unprecedented opportunity to re-cast their sales efforts to serve advisors better. Yet most seem to have honed in on compensation and headcount as the primary concerns, and have not yet taken the opportunity to optimize the other levers that they control. However, to their credit, the most progressive firms are starting to move in this direction.