Read his report and you get a rosy picture of a thriving industry, a historical snapshot less than a year old, of booming fund flows and wholesalers reaping tremendous gains. But talk to the man himself and the picture changes: an industry hobbled by a declining economy, wounded by terrorist attacks and marked by bare-essentials thinking.
Don Lariviere and the recruiting firm he heads released a study last week showing that financial industry wholesalers saw substantial pay increases last year. Mutual fund sales managers garnered markedly larger cash compensation packages, by at least 14% and as much as 32%, than other financial industry wholesalers, the study said. And fund wholesalers saw an overall increase by as much as 9% in pay, he said.
A New Picture Emerges
But the report, released by DGL Consultants and known as the 2000-2001 Sales Compensation Survey & Analysis, could already be ancient history. Wall Street's protracted slump, compounded by the attacks on New York and Washington D.C., will likely force fund companies to reevaluate their bottom lines, he said. And, while wholesalers have posted pay increases for each of the seven years the study has been conducted, that may not be the case when DGL issues its report next fall.
"The companies that hold their own will show little to no growth and that will be a positive for those companies," Lariviere said. "The other companies that are experiencing tremendous net redemptions will experience a big reduction in sales compensation."
In many cases, wholesalers have seen their market shrink rapidly in the wake of the attacks. Some brokers, the staple of wholesalers' businesses, have not even come to work, Lariviere said and some retail brokers are losing their jobs. In most cases, companies were reducing staff before the events of Sept. 11, but the phenomenon has been hastened by the new political and economic climate, he said.
Put on the Squeeze
In addition, companies are consolidating their distribution channels, and some wholesalers have helplessly looked on as key sources of revenue evaporate, he said. Firms have, for example, folded bank channels into financial planning channels. Disparate groups of wholesalers had been responsible for each of those channels, and the wholesalers are now left to either rethink their strategies or scrap for the business in a narrowing market, Lariviere said. He did not provide examples of specific firms.
But much of this gloomy scenario is contingent on sliding markets, and Lariviere is the first to admit he can't predict what his report will look like next fall. For now, he is sure the picture is bleak. To maintain their ranks of key wholesalers he said fund companies will likely have to include guarantees of compensation in contracts.
Wholesalers and other executives, meanwhile, are tight-lipped about their projections.
New Game Requires new Rules
Asked how current markets might affect wholesaler pay, Timothy Pillion, VP of bank marketing and sales at Federated Investors, chuckled, then paused. He said Federated has always taken a handful of considerations into account when adjusting wholesaler pay, including how the firm is performing, whether business units are growing and whether market share is increasing. "I'm not just saying that today. That's how we compensate our people," he said. "Other people might be catching up to that."
Indeed, firms that want to keep the loyalty of their wholesalers will likely have to alter their compensation packages, said one wholesaler who asked to remain anonymous. He said pay has declined this year and will likely continue to do so. But he said fund companies must realize that a good wholesaler is not one who simply maintains great sales records in booming markets, but one who maintains key retail relationships and closely manages those contacts during tough times. Firms, he said, should compensate wholesalers based on those criteria as well as their sales numbers.
Employing that kind of strategy will be difficult, of course, because companies will have to continue "doing a significant level of business" in order to adequately compensate wholesalers, he said, hence the concern.
In the meantime, he says he will not worry about his pay. "I've never focused on that," the wholesaler said. "I've always felt the industry has treated me fairly. I've been through conditions like this before."