wholesalers

A Reminder of What Technology Can Do

Posted by Mike McLaughlin on Mar 22, 2012, in Thoughts , tagged with , , ,

A few weeks back, we presented at the MFEA Distribution Technology Summit in Tampa. Much of the discussion focused on the impact of mobile – Web sites, apps, CRM, advertising – on both asset managers and financial advisors. We’re biased, but it was a good day.

The last session was a panel of sales executives. Among the many issues the panel touched on was the idea of adoption – how much are advisors and wholesalers actively using mobile technology?

The sales executives provided a valuable reminder – there is a non-trivial subset of  advisors and wholesalers who will NOT embrace mobile. While technology can bolster execution and add a positive dynamic to relationships with advisors, it is not essential for everyone.

The reality is:

  • Many wholesalers and advisors have been successful for a very long time before mobile became important
  • Some wholesalers and advisors will always be inclined to avoid new technology

Image via Kevin Knight

It reminded me of a project we did a few years ago. We spent 20 days in the field with some of the most successful insurance producers in the country. As it turned out, two of these producers were complete technophobes. When I say complete, I mean they:

  • Did not have a computer or laptop in their offices
  • Did not carry a smartphone
  • Spent exactly zero minutes per day surfing the Web and using e-mail

And yet, both were HUGELY successful by any measure. In fact, these guys are in the top 0.2% of producers in terms of overall production. Similarly, some of the best wholesalers in the industry rely on zero cutting-edge technology. The MFEA panel discussion reminded me of this.

Technology in and of itself is not a solution, but part of a suite of resources that can make doing business easier. We need to avoid thinking that technology is universally transformational, that more of it is always going to help everyone.

Our collective excitement at the opportunities presented by technology needs to be coupled with an equal dose of pragmatism.

Sales Compensation: Same as It Ever Was

Posted by Mike McLaughlin on Nov 10, 2011, in Thoughts , tagged with , ,

Last week I read a Tweet attributing the following to the head of a large mutual fund company:

Compensation structures have to change.

I also recently read a trade journal article about the challenges associated with sales compensation. It covered the usual bases:

  • “…firms still fall short when it comes to using pay to incentivize wholesalers to focus on certain activities.”
  • “We are looking for individuals who are aligned with the business goals of the organization.”

Here’s how I see it:

Why? Because of how little the comp conversation has changed over the years. For all the supposed “strategic” conversation around paying salespeople, the last decade has shown comp to simply be an operational tool requiring ongoing tactical adjustments.

The quotes above mirror discussions dating back more than ten years. A quick search on Ignites yielded the following:

  • 2010: “…pay models are in flux as firms struggle to offer compensation that can attract and retain key talent but also stand up to bottom-line realities…”
  • 2009: “…more companies should consider strategies that align compensation with the overall profitability of the firm.”
  • 2006: “…companies are increasingly considering [profitability] when calculating pay packages in order to more closely align wholesalers’ objectives with their own.”
  • 2001: “…fund firms should look at bringing wholesaler compensation in line with the firm’s profit model.”

I’m not saying that pay isn’t important – it certainly gets a huge amount of airtime and consideration at our clients. But for now it is not an area that is ripe for innovation. Instead, firms will continue the cycle of making moderate modifications to try and find the right incentives, the right level of complexity, and the right targets.

Advisors’ Use of Fund Firms: What’s the Truth?

Posted by Mike McLaughlin on Jun 22, 2011, in Thoughts , tagged with , , , , ,

Last week Cerulli Associates released a study built from a survey of over 1,800 advisors. As chronicled in Ignites (subscription), a key finding focuses on how advisors are using fewer mutual fund providers and “…the importance of cementing solid relationships to secure preferred provider status…”. A snippet of the relevant data:

  • 57% of advisors use 5 fund firms or less, up from 37% in 2009
  • 13% of advisors use 15 fund firms or more, down from 25% in 2008

The idea of concentrated mutual fund family usage has been increasingly trumpeted over the past few years. And I have no doubt that the data is reported accurately based on advisors’ responses. But I am dubious of the idea that so many advisors use so few fund firms. Two reasons why:

  • The first-hand knowledge we have of our clients’ data shows it’s common for firms to have huge numbers of small, single-product advisor relationships.

  • Many firms prioritize cross-selling over pure prospecting. Sales strategy and comp plans are frequently driven by the desire to build deeper, multi-product advisor relationships. Highly-concentrated assets among advisors, as indicated by the survey data, would seemingly dictate a greater focus on new client acquisition.

So what does this mean? Two takeaways:

  • Beware Self-Reported Data: I think it’s human nature to neglect the “long tail” of small positions within clients’ portfolios. There may be 5 primary firms used by advisors, but not 5 total.
  • Beware Aggregated Data: The survey is cross-channel and includes advisors with an average AUM of $50M. But fund firms typically have a more targeted, specific strategy than that. It’s important to isolate the subset of comprehensive data that is relevant and draw conclusions from there.

We’ve been involved in enough syndicated research to know that the data gathered always leaves room for interpretation. The findings here fit the bill.

When an Advisor Calls, Who (or What) Answers?

Posted by Mike McLaughlin on May 16, 2011, in Thoughts , tagged with , , ,

The other day I heard a radio ad for a company promoting green technology. Most of the ad wasn’t memorable – I don’t even recall the name of the company – but the ending stuck with me. The firm gave out their toll-free number and then stated that “a live person will pick up your call”. No automated system (IVR). No menu to navigate.

I thought that sounded pretty good.

I then wondered: do any asset managers have a live person answering their toll-free phone numbers for advisors? So I called ten firms to find out. The results:

  • One firm, Nuveen, has a sales rep pick up directly.
  • Another, Columbia, has an IVR say your call is important before patching the advisor through to a rep.
  • Three others – BlackRock, Delaware, Janus – prompt first for an extension then have the advisor hold for a rep.
  • The remaining five firms present an automated menu with anywhere from 2-6 options.

In other words, half the sample enabled an advisor to reach a human being without proactively doing anything besides placing the call. Yet only Nuveen has that call directly answered by a person. I can’t claim that this makes Nuveen’s customer service any better, or that they do a better job of converting cold inbound calls to sales. But I do think the direct personal interaction is, simply, nicer. And, evidently, rare.

(As a sidebar, the configuration of the different IVR systems is worth another discussion down the road. The options vary significantly by number/type. And, interestingly, two firms use their IVRs to promote specific products prior to presenting a menu of options.)

How Do You Want Advisors to Follow-Up?

Posted by Mike McLaughlin on Apr 06, 2011, in Thoughts , tagged with , , , ,

I spent an hour last week monitoring an asset manager’s quarterly conference call with advisors. As the call wrapped, the executive moderating the call invited advisors to follow up via the firm’s:

  • Web site
  • Twitter feed
  • Sales team

What was interesting to me is that is the exact order in which these outlets were introduced. Web, then Twitter, and finally the wholesalers. Besides the order, the voiceover did even more to reinforce the primacy of the Web and Twitter relative to the sales team.

Obviously this a minor, tactical part of the call. But I’m intrigued by the order. I would not claim that online outlets provide more effective follow-up than a wholesaler in this case. And the call did not have enough advisors to raise concerns about an overwhelming volume of inbound calls/e-mails.

So was this a conscious decision? Is there a reason why the Web and Twitter were prioritized? I can think of a few good explanations, and will follow up here when I get a concrete answer.