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What's in store for wholesaling in the coming year?

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As asset managers continue to do more with less, substantial changes are taking place when it comes to selling mutual funds.

Many asset managers are in the process of reducing their overall number of wholesalers and changing their roles and compensation structures. They're also changing their sales strategies to emphasize national accounts and digital sales technologies. By taking these measures, firms are looking to cut costs and be more efficient with fewer salespeople in the field. So, what is driving these drastic changes?

The biggest driver of change in wholesaling is money from the youth, says Peter Watson, principal at Boston Consulting Group.

"The predominant cohort of money in motion will soon be driven by millennials. This is going to happen sometime between 2025 and 2030, which is probably sooner than most people would anticipate. It's going to shape the industry in a lot of ways," he says.

Just as investors are younger, so too are planners. Both are more digitally savvy and geo-agnostic, decreasing the emphasis of sitting down with a financial advisor in person. Millennials are also more likely to engage digitally with an advisor. If the advisor has a robust digital offering, competitive fees and an understanding of their needs, they may rarely, if ever, need to meet in person. That's where things are moving, Watson says.

"The shift to hybrid wholesaling is changing how the industry thinks about marketing and digital tech," writes Emilie Totten, head of marketing at Synthesis Technology.
"The shift to hybrid wholesaling is changing how the industry thinks about marketing and digital tech," writes Emilie Totten, head of marketing at Synthesis Technology.

This trend is also mirrored by the wholesaler. As books transition to the next generation of younger financial advisors, wholesaling teams will follow suit. "There are firms I've met with recently who want to get ahead of this trend, and have an explicit mandate to make their wholesaling force younger and more diverse," Watson says.

As managers move to create younger wholesaling teams, they're also adapting the model to leverage digitally savvy 'hybrid' roles. For example, as part of the natural turnover process, firms might backfill the traditional in-person coverage with digitally enabled centralized teams, with the flexibility to travel for key clients and meetings. As firms search for new pockets of growth, this creates greater capacity for remote prospecting, with hybrids and even internals driving new relationship-building.

This doesn't imply a reduced profile on the wholesaling team — quite the contrary, Watson says. As more business-building responsibility is driven by the internal team, the hybrid model creates a smooth growth trajectory for high performers. "One firm I know well has rolled out a pretty disruptive concept: that as an internal develops enough deep relationships, they can create their own territory and own 150-300 clients," he said. This new model, he added, it's not unheard of for new hybrids to drive more trades than externals and ultimately manage an asset base.

The shift to hybrid wholesaling is changing how the industry thinks about marketing and digital tech. Traditionally, sales teams were concerned that broad marketing campaigns wouldn't address nuances and clients' product preferences. But with modern lead generation and lead scoring capabilities, the first expression of interest is often an advisor opening a marketing email.

Modern firms stream these "hot leads" into a collaborative nurturing process, leveraging integrated touchpoints with both sales and marketing.

"As we move into this new era, there is an opportunity for the hybrid wholesaler to be their own chief marketing officer," Watson says.

Wholesalers can use these tools to build mini digital campaigns and track engagement. In turn, innovative teams are creating incentives around certain metrics like open rates and virtual meeting engagement. This leads to another major shift taking place — wholesaler compensation. Sales managers are realizing, while you can't control product performance, you can control sales activity.

As a result, sales teams are increasingly incorporating activity and digital engagement metrics in compensation design. Digital sales tools that can provide these metrics help firms get to this digital model faster.

Regardless of the shift to hybrid wholesaling and virtual meetings, it's clear that success comes down to the quality of the relationship between the wholesaler and advisor. Good wholesalers are not just pushing products, they're consulting:

  • How can we help?
  • What problems are you having?
  • How can we help you grow?

However, it's difficult to be consultative with every single client or prospect. Dan Sondhelm of Sondhelm Partners recommends firms to first look at how many relationships wholesalers can realistically manage "If each wholesaler can manage 200 relationships and there are twelve wholesalers, then a firm can actively manage 2400 relationships. They can use technology and news media to influence everybody else," he said.

Sondhelm also noted that firms are trying to gain market share by placing emphasis on national accounts. Wholesalers are spending time higher up the food chain, calling on the research teams and gatekeepers who have influence at Schwab, Raymond James, LPL, and other platforms.

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He noted while national accounts are important, there's also substantial opportunity to make money with second-tier channels. "Everybody is going after the broker-dealers, but there is a lot of opportunity with family offices, bank trust departments, and TAMPs. The biggest firms have access to the resources they can dedicate to second-tier opportunities, but smaller firms often don't," he said.

While it's a very uncertain time for wholesalers in asset management, it's also very exciting.
Wholesalers now have the ability to reach more people than ever before and take more ownership over the message. The firms that can leverage digital tools to be more efficient and customer-centric will be successful.

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