Fund manufacturers revamp wholesaling to keep distributors, advisors onside

(February 11, 2003) For fund companies struggling to staunch the outflow of money from mutual funds, advertising is out and meeting advisors directly is in. That shifting outreach reflects more than investor disappointment, however. It acknowledges that funds are sold, not bought, and advisors hold the key to sales. More than that, the balance of […]

By Scot Blythe | February 11, 2003 | Last updated on February 11, 2003
5 min read
  • Canadian wealth managers focus on market performance growth path
  • Mutual funds to lose asset share to alternative products, managed accounts
  • More than funds: What to expect from your wholesaler this RRSP season and beyond
  • Advisors uncertain over which fund companies to support, survey finds
  • A conscious decision: Darin Diehl looks at the emerging consultant model from wholesalers

    "It’s a hyper-competitive environment. You have to elevate the classical field people who are out there to no longer support a transaction-based environment," said Enns. "Instead, you have to be more consultative." For wholesalers, that means understanding an advisor’s needs and goals, then producing the right products and pricing, often fee-based products. It also includes strategies on how to make assets stickier as well as practice management ideas, even training sessions on new types of products. Tax planning can be an important part of what the wholesaler can bring to the advisor, even if it’s just an accountant at RRSP time, Enns added.

    As a result, instead of "slinging product," wholesalers are adopting a consultative approach to identify advisor needs and then offer "solution-based" products. Sometimes it’s a mutual fund, but more likely it might be what Enns calls a "portfolio in a box" — a mutual fund portfolio that includes third-party funds. It might also be mutual fund wraps, or "multi-disciplinary products" that offer a range of investment managers and styles along with standardized reporting. Gone are the days when a wholesaler could concentrate on servicing only mutual funds; increasingly the wholesaler has to support the whole range of asset solutions, from funds to wraps to separately managed accounts.

    Often, they’re backed up by specialist wholesalers. "We used to call them product managers and they’d go to sleep at night with the prospectus of all the equity funds. They’d know everything about them," recalled Enns. But the problem was that they were used in a marketing role to help put together product literature. "Nowadays, it’s morphed into a situation where they have a CFA [Chartered Financial Analyst]-level of intelligence and can really do a number on the capital markets and how the funds act under that scenario and what’s happening from a market perspective."

    Still, the Canadian market isn’t deep enough to support specialist wholesalers in the field. They remain in-house experts able to back up generalist wholesalers. Even then, it’s an expensive proposition for smaller fund companies, who might find that their best strategy is to cull their less-productive relationships and concentrate on distribution relationships where they have an edge.

    What do you need or want from your wholesaler? Have you noticed a change in how your wholesaler meets your needs? Share your thoughts in the “Free for All” forum of the Talvest Town Hall on Advisor.ca.

    Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

    (02/11/03)

    Scot Blythe

    • (February 11, 2003) For fund companies struggling to staunch the outflow of money from mutual funds, advertising is out and meeting advisors directly is in. That shifting outreach reflects more than investor disappointment, however. It acknowledges that funds are sold, not bought, and advisors hold the key to sales. More than that, the balance of power in the wealth management industry has shifted decisively from fund manufacturers to distributors, a new research report says.

    The study, called “Distribution in a Downturn: Controlling Costs and Making Difficult Decisions," conducted by the Financial Research Corporation in Boston and Credo Consulting in Vancouver, takes a look at how tier one fund companies are reallocating their sales and marketing budgets. It finds a significant shift from "programs to people," at least in Canada.

    Among the markers of that shift are a 15% increase in spending on hiring, compensation and travel costs and a 13% decrease in such budget items as advertising, promotional items and conferences. By contrast, the report says that the U.S. market is leaning toward lower compensation and staff cuts.

    "Wholesaling efforts today are as critical, if not more so, than when we studied the Canadian market two years ago," said co-author David Enns, president of Credo Consulting. To make the most of their wholesaling efforts, fund companies have stepped up personal contacts with advisors, as well as support and creative compensation for wholesalers.

    "Face time with advisors is ultimately what matters in creating relationships, keeping assets and ultimately growing market share," added Enns. "In a difficult market, that role is even more important and tier one companies are definitely focused on supporting the advisor relationship with hands-on help, not just Web site support."

    Key account managers

    Expanded outreach includes meeting the key people on the distribution end, so that a fund makes a distributor’s recommended list. "When we did the study a couple of years ago there was really an interest expressed by the firms to put in place in the organizational chart senior personnel experienced in capital markets and relationships to deal with the heads of distribution at the distributions firms," Enns noted. "A key account manager can take on those clients and go out and grow the business from the top down."

    Since his original study, Enns said, manufacturers have embraced key account management. "It makes sense for a couple of reasons," he explained. "It supports the consultative sales process. You can be great on performance, a good brand and be placed on the short list at Dominion Securities, for example, for mutual funds or be placed in a mutual fund wrap. But if you don’t have a key account person servicing that account, coming to them and saying, ‘here are some good sales ideas that you can put on your intranet for your brokers on a morning call and I’ll help support the sale of our product’ — just because you’re there on the platform on the recommended sales list doesn’t mean you’re going to get sold. Mutual funds are still sold, not bought, even from the advisor perspective."

    Specialist wholesalers

    That kind of interaction works all the way down the line, and advisors have certainly become more demanding of wholesalers. They don’t want new product information, and instead are looking for marketing and prospecting tips, investment seminars and support.

    Related Stories

  • Canadian wealth managers focus on market performance growth path
  • Mutual funds to lose asset share to alternative products, managed accounts
  • More than funds: What to expect from your wholesaler this RRSP season and beyond
  • Advisors uncertain over which fund companies to support, survey finds
  • A conscious decision: Darin Diehl looks at the emerging consultant model from wholesalers

    • "It’s a hyper-competitive environment. You have to elevate the classical field people who are out there to no longer support a transaction-based environment," said Enns. "Instead, you have to be more consultative." For wholesalers, that means understanding an advisor’s needs and goals, then producing the right products and pricing, often fee-based products. It also includes strategies on how to make assets stickier as well as practice management ideas, even training sessions on new types of products. Tax planning can be an important part of what the wholesaler can bring to the advisor, even if it’s just an accountant at RRSP time, Enns added.

    As a result, instead of "slinging product," wholesalers are adopting a consultative approach to identify advisor needs and then offer "solution-based" products. Sometimes it’s a mutual fund, but more likely it might be what Enns calls a "portfolio in a box" — a mutual fund portfolio that includes third-party funds. It might also be mutual fund wraps, or "multi-disciplinary products" that offer a range of investment managers and styles along with standardized reporting. Gone are the days when a wholesaler could concentrate on servicing only mutual funds; increasingly the wholesaler has to support the whole range of asset solutions, from funds to wraps to separately managed accounts.

    Often, they’re backed up by specialist wholesalers. "We used to call them product managers and they’d go to sleep at night with the prospectus of all the equity funds. They’d know everything about them," recalled Enns. But the problem was that they were used in a marketing role to help put together product literature. "Nowadays, it’s morphed into a situation where they have a CFA [Chartered Financial Analyst]-level of intelligence and can really do a number on the capital markets and how the funds act under that scenario and what’s happening from a market perspective."

    Still, the Canadian market isn’t deep enough to support specialist wholesalers in the field. They remain in-house experts able to back up generalist wholesalers. Even then, it’s an expensive proposition for smaller fund companies, who might find that their best strategy is to cull their less-productive relationships and concentrate on distribution relationships where they have an edge.

    What do you need or want from your wholesaler? Have you noticed a change in how your wholesaler meets your needs? Share your thoughts in the “Free for All” forum of the Talvest Town Hall on Advisor.ca.

    Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

    (02/11/03)

    (February 11, 2003) For fund companies struggling to staunch the outflow of money from mutual funds, advertising is out and meeting advisors directly is in. That shifting outreach reflects more than investor disappointment, however. It acknowledges that funds are sold, not bought, and advisors hold the key to sales. More than that, the balance of power in the wealth management industry has shifted decisively from fund manufacturers to distributors, a new research report says.

    The study, called “Distribution in a Downturn: Controlling Costs and Making Difficult Decisions," conducted by the Financial Research Corporation in Boston and Credo Consulting in Vancouver, takes a look at how tier one fund companies are reallocating their sales and marketing budgets. It finds a significant shift from "programs to people," at least in Canada.

    Among the markers of that shift are a 15% increase in spending on hiring, compensation and travel costs and a 13% decrease in such budget items as advertising, promotional items and conferences. By contrast, the report says that the U.S. market is leaning toward lower compensation and staff cuts.

    "Wholesaling efforts today are as critical, if not more so, than when we studied the Canadian market two years ago," said co-author David Enns, president of Credo Consulting. To make the most of their wholesaling efforts, fund companies have stepped up personal contacts with advisors, as well as support and creative compensation for wholesalers.

    "Face time with advisors is ultimately what matters in creating relationships, keeping assets and ultimately growing market share," added Enns. "In a difficult market, that role is even more important and tier one companies are definitely focused on supporting the advisor relationship with hands-on help, not just Web site support."

    Key account managers

    Expanded outreach includes meeting the key people on the distribution end, so that a fund makes a distributor’s recommended list. "When we did the study a couple of years ago there was really an interest expressed by the firms to put in place in the organizational chart senior personnel experienced in capital markets and relationships to deal with the heads of distribution at the distributions firms," Enns noted. "A key account manager can take on those clients and go out and grow the business from the top down."

    Since his original study, Enns said, manufacturers have embraced key account management. "It makes sense for a couple of reasons," he explained. "It supports the consultative sales process. You can be great on performance, a good brand and be placed on the short list at Dominion Securities, for example, for mutual funds or be placed in a mutual fund wrap. But if you don’t have a key account person servicing that account, coming to them and saying, ‘here are some good sales ideas that you can put on your intranet for your brokers on a morning call and I’ll help support the sale of our product’ — just because you’re there on the platform on the recommended sales list doesn’t mean you’re going to get sold. Mutual funds are still sold, not bought, even from the advisor perspective."

    Specialist wholesalers

    That kind of interaction works all the way down the line, and advisors have certainly become more demanding of wholesalers. They don’t want new product information, and instead are looking for marketing and prospecting tips, investment seminars and support.

    Related Stories

  • Canadian wealth managers focus on market performance growth path
  • Mutual funds to lose asset share to alternative products, managed accounts
  • More than funds: What to expect from your wholesaler this RRSP season and beyond
  • Advisors uncertain over which fund companies to support, survey finds
  • A conscious decision: Darin Diehl looks at the emerging consultant model from wholesalers

    • "It’s a hyper-competitive environment. You have to elevate the classical field people who are out there to no longer support a transaction-based environment," said Enns. "Instead, you have to be more consultative." For wholesalers, that means understanding an advisor’s needs and goals, then producing the right products and pricing, often fee-based products. It also includes strategies on how to make assets stickier as well as practice management ideas, even training sessions on new types of products. Tax planning can be an important part of what the wholesaler can bring to the advisor, even if it’s just an accountant at RRSP time, Enns added.

    As a result, instead of "slinging product," wholesalers are adopting a consultative approach to identify advisor needs and then offer "solution-based" products. Sometimes it’s a mutual fund, but more likely it might be what Enns calls a "portfolio in a box" — a mutual fund portfolio that includes third-party funds. It might also be mutual fund wraps, or "multi-disciplinary products" that offer a range of investment managers and styles along with standardized reporting. Gone are the days when a wholesaler could concentrate on servicing only mutual funds; increasingly the wholesaler has to support the whole range of asset solutions, from funds to wraps to separately managed accounts.

    Often, they’re backed up by specialist wholesalers. "We used to call them product managers and they’d go to sleep at night with the prospectus of all the equity funds. They’d know everything about them," recalled Enns. But the problem was that they were used in a marketing role to help put together product literature. "Nowadays, it’s morphed into a situation where they have a CFA [Chartered Financial Analyst]-level of intelligence and can really do a number on the capital markets and how the funds act under that scenario and what’s happening from a market perspective."

    Still, the Canadian market isn’t deep enough to support specialist wholesalers in the field. They remain in-house experts able to back up generalist wholesalers. Even then, it’s an expensive proposition for smaller fund companies, who might find that their best strategy is to cull their less-productive relationships and concentrate on distribution relationships where they have an edge.

    What do you need or want from your wholesaler? Have you noticed a change in how your wholesaler meets your needs? Share your thoughts in the “Free for All” forum of the Talvest Town Hall on Advisor.ca.

    Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

    (02/11/03)