Volatile markets that have sapped flows and shifting distribution models are creating a hostile work environment for many fund wholesalers who are finding themselves lighter in the wallet and sometimes out of work, according to industry observers.
While each fund company has a slightly different compensation structure, wholesalers' salaries are typically commission-based. And if industry-wide flows are any indication of what wholesalers are taking home in pay, they are not are not even close to making what they did last year, according to Investment Company Institute data. For the year, net new cash flow into stock mutual funds amounted to $48 billion dollars as of July. That is down from the $231 billion stock funds attracted for the same period the prior year.
"Wholesaler compensation is tied to new sales and you can see the story. It's very transparent," said George Wilbanks, chief of the investment management practice for New York-based executive recruiting firm, Russell Reynolds.
What isn't so transparent is the number of wholesalers who have been laid off. Many firms are quietly cutting their wholesaling teams, said Wilbanks.
While most of the cuts are relatively small at individual firms, they amount to a whole lot of pink slips industry-wide, said Charles O'Neill, a principal with Diversified Management Resources, a Boston-based marketing consulting and executive search firm. "We all read about the firms that have made large-scale cut backs," he said. "But there are many other firms that are quietly trimming their wholesaler ranks."
Still, while times may be tough for some sales executives, top performers will always be in demand. In fact, at many fund companies scaling back their sales force is a strategy designed to separate the wheat from the chaff and reward those producers who are consistent performers, said Brian Sinclair, a consultant with Hewitt Associates.
Those firms are eliminating wholesalers with weak numbers and are passing additional business on to their top sales executives, he said. And a smaller staff can also mean higher commission rates, which companies can use as a way to recruit top wholesalers from other companies, he said.
Changing Sales Models
The growing number of cuts come at a time when many fund companies are trying to create sales teams that use consultative sales strategies, not just product pushers. The glib wholesaler who relied on a couple of sales ideas, a product's strong performance and smooth presentation skills to satisfy brokers' and planners' needs is becoming a thing of the past, said O'Neill.
Along with a greater level of investable assets, investors have a much deeper understanding of financial services and they are asking their brokers and planners much more complicated questions.
Besides competing in an overcrowded fund market, wholesalers need to be able to position their funds against a variety of new products available to brokers and financial planners.
That requires a lot more than a sleeve of golf balls and a snazzy sales presentation. Today, wholesalers are expected to be well-versed in every aspect of the product they are selling and financial consultants want to get the facts on the product.