Although the independent broker/dealer channel is one of the largest and fastest growing distribution channels for mutual funds, it is a tough one for wholesalers to target, according to a new study issued by Cerulli Associates of Boston.

The independent broker/dealer channel is the second largest distribution channel for mutual funds, accounting for 19% of all fund sales in 2000, compared to national full-service brokers, which totaled 34%. However, taking redemptions into account, independent broker/dealers lead the industry in sales. At the end of 2000, independent broker/dealers represented 29% of net fund flows compared to national full-service brokers, which made up just 19% of net flows.

While the independent channel is lucrative, it is a tricky one for fund wholesalers to target because of its size and scattered nature, according to the study. Most fund groups focus on selling agreements with the largest 10 to 20 independent broker/dealers, grouping smaller firms in separate categories. Moreover, because the average independent broker/dealer office has 5.4 representative per office, they are less concentrated than full-service firms, making it difficult for wholesalers to meet multiple reps at each office.

But wholesalers can often win favor with independent broker/dealers by providing training materials, business seminars and research that help them develop their businesses. Those kind of "value-added" services help independent shops, which are often strapped for resources, compete with the full-service firms, the study said.

And while geography presents logistical challenges for wholesalers, many firms have attempted to tap the independent broker/dealer channel by using virtual wholesaling techniques including teleconferencing and other techniques, the study said.

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