Advisors needs and wants are moving targets and mutual fund wholesalers must constantly adjust to if they want to hit the bullseye. In the years following the advent of the Internet, wholesalers found former value adds, such as daily net asset values and stock prices, that they used to offer as exclusives have mainstreamed.
Now, wholesalers' specialized and intimate familiarity with funds as well as how they stack up to the competition is most prized by many advisors.
John Nickodemus, national sales manager at Putnam Investments, said that his firm's hiring process starts inside wholesaling call center. "Two-thirds of our wholesalers are promoted from inside the call center, this is largely a referral based process," said Nickodemus.
"The training process at Putnam is an intensive three-to-five year process. It creates not only great wholesalers, but great employees. If we can train someone to be a wholesaler, they can take just about any position at Putnam. We have people in sales and marketing that are trained as wholesalers."
He added that Putnam's wholesalers need to know not only Putnam's products but the firm's competitors' products as well. Putnam currently employs 60 external wholesalers nationwide.
On a smaller scale, Chuck Thompson, director of U.S. Retail at Henderson Global Investors, said that the greatest wholesalers are "the trusted advisors to the advisors" who have been through the rough down markets. "We went through a very rough experience 18 months ago with the European debt crisis because we had a lot of exposure to European equities in our products. But we were able to stem the tide of redemptions by consistently showing up and giving our perspectives as to when we thought the crisis was going to be over and where the opportunities were," said Thompson.
"Even if you don't have something to sell today, you have to be consistently showing up to be trusted. "
Thompson, who served as a regional vice president at Van Kampen Investments for five years before moving on to Henderson where he has worked for the last 11 years, said most of his 12-member wholesaling team have an average of seven years of service at the firm. Thompson's red flags when hiring for wholesalers include "someone who has been at five places in 10 years" and if they don't list advisors as their references. "What I would look for is someone with 10 years of [advisor] relationships," he said.
According to Thompson, RIAs and wirehouses that are looking for specialists and advisors want a circle of specialists to help them pull the trigger on asset allocation or pull back from the market. "Advisors never forget who makes them money and they always remember who loses them money," said Thompson.
So what is Henderson's wholesaler on-boarding process? "We're so small that we don't have a lot of time to train," said Thompson. "We need to hire individuals who are self-starters who can go through three days of orientation. Our formal training is informal in that we marry up wholesalers with two senior people and they connect weekly to learn how the senior person is talking about macro and micro environments and how we tell the Henderson story."
Thompson added that he is looking to add San Francisco as a new territory to the firm's coverage at the end of the year.
Further down market, New Jersey-based Frank Capital Partners is in the market for wholesalers with even more concentrated traits and skillsets. Monique Weiss, chief operating officer of FCP, said because the firm is a boutique shop, she's looking for a wholesaler who embodies the entrepreneurial and independent spirit of the firm.
"I worked at Morgan Stanley for 11 years and when they have 60 wholesalers running around the country covering three channels in every state, it's a very different type of sales process," said Weiss. "Wholesalers are getting paid a salary and a basis point on each fund and they look at every fund as a product."
According to Weiss, the Frank Value Fund (FRNKX) is a go-anywhere equity fund, which predominantly targets independent reps, advisors, family offices and endowments and she is looking for a wholesaler who has a long-term shareholder mentality.
"I would more likely find a wholesaler who has worked for a hedge fund group because they're more likely to have worked with family offices in terms of explaining strategies," she said.
The firm currently employs one wholesaler in the Northeast but would most likely expand in the Southeast where it has a client base, according to Weiss.
In whatever ways firms train or hire their wholesalers, getting a first meeting with an advisor is in itself a challenge. Dave Swanson, founder and managing partner of SwanDog Strategic Marketing, said that wholesalers need to get the right message through the right medium.
"Older practices of segmenting advisors by assets and relationship with the provider are outdated," Swanson said. Instead, Swanson segments and drops advisors into four bucket traits: habitual, receptive, proactive, skeptical.
"There are four main segments of advisors based on segmentations and wholesalers need to tailor their message to these," Swanson said.
Once wholesalers get that meeting, they need to know how to meet the needs of the advisor. Product knowledge is a touchstone across all channels. FUSE Research Network recently published a study dubbed Advisor Perception of Wholesaler Value based on data from WealthManagement.com's 2013 Wholesalers Perception Survey, which included 782 respondents across distributors.
The study echoes Nickodemus' sentiments in that it found the two most valuable services provided by a wholesaler to be new product information and updates on existing products. Contrary to these findings, the report also reveals that most home offices think that advisors have all the information they need about their products on their in-house screens.
"I suspect it's[the problem for wholesalers] in some part not being able to explain how the products fit into the advisor's business, but also not knowing how their products stack up against other companies, such as a rep from e OppenheimerFunds not knowing how their product stacks up against one from another company and having a value proposition as to why it should be used," said Neil Bathon, managing partner of FUSE.
"The older wholesalers may be less likely to adapt to the new reality."
Henry Yoshida, principal at The Maresh Yoshida 401k Group, an ERISA-focused advisory practice, has a direct vantage point and expectation of wholesalers.
"I think that too many wholesalers these days are the guys who take you out to dinner, lunch or pick up a bar tab. They don't have the in-depth knowledge about their firm," said Yoshida.
"I expect wholesalers to have a high level of knowledge about the products of the firm they represent as well as the marketplace in general. More than 50% of wholesalers I see are just relationship guys."
According to Yoshida, within the last 60 days he has been invited to numerous social occasions by wholesalers, such as the U.S. Open golf tournament, indoor skydiving and NBA games.
However, he said he would prefer that the wholesalers "just come to my office and explain the company's products in-depth or why any assets are underperforming."
"The wholesaler should be an extension of the fund company. I don't expect wholesalers to have the depth of knowledge that the portfolio managers have, but I would like it if they were on the level of the client portfolio manager at the provider," he said.
What other service can wholesalers bring to Yoshida's table? He said that knowing what other advisors are up to in their territories is a value-add.
He also noted that firms like Legg Mason make the conference rooms at their fund sub-advisors around the country available to advisors that want to hold meetings there with the reservations in the names of the wholesalers.
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