Not so long ago, money managers campaigned to market their services on as many distribution platforms as possible, from wirehouse to independent adviser. That is no longer the case.
Money managers have traded in their wide-sweeping searchlights for focused laser beams; they are seeking fewer but deeper relationships. To bolster that effort, investment firms are also putting a higher polish on sponsor relationship management, specifically upgrading the role of the key-account manager to a sophisticated position involving relationship management, sales and business development.
Until recently, the key-account manager played largely a maintenance role, more passive than active. Clients might call on key-account managers for quarterly reports and other administrative tasks.
Sometimes, frontline salespeople would angle for a key-account job to get relief from the wear and tear of fieldwork. Expectations are changing.
The new key-account person must be well versed in which distribution platforms will offer the most bang for the investment firm's buck and be able to help gain a toehold. With current relationships, the key-account person must be able to cross-sell while massaging the pre-existing contacts.
If the current key-account managers can't adjust to the change, they will find themselves pounding the payment. One head of key accounts at a large money management firm said the transition isn't easy.
Some who worked for him resisted the extra training he implemented to teach his staff about the firm's newly broadened array of products. They were shown the door.
Cost savings the motive
Behind the shift is cost savings. Wholesalers are expensive to deploy.
Money managers have simply decided that their field marketing teams must be able to raise a certain number of assets, de minimis, or move on. That means penetration across major platforms at each sponsor.
As a result of that policy, one firm we know slashed the number of sponsors with which it works by 25%. In practice, that means outside asset managers generally don't want to be calling on advisers at distributors that allow them on only one of their platforms.
They want to be part of a mutual fund wrap platform and an annuity platform and any multidisciplinary-account platforms available at any given sponsor. Particularly important in this environment is gaining a toehold in non-discretionary fee-based accounts.
Investment managers now understand that financial advisers entering the fee-based business typically begin with non-discretionary programs. Mutual funds are sold increasingly through fee-based wrap programs, making it too costly to devote wholesaling efforts to firms that haven't approved managers for their wrap platforms.
Key-account executives are emerging as the central hubs for the shift in sales, helping to determine where to focus marketing efforts and following up with client service and cross-selling work. In fact, just as institutional marketers who sell to defined benefit plans are valued for the breadth and depth of their relationships with consulting firms such as Callan Associates Inc. of San Francisco or Mercer Investment Consulting Inc. of Chicago, so too are key-account managers valued for their relationships with wirehouses and other sponsors.
In addition, key-account managers work with product development people to create new products and coach members of the marketing staff on how to position products.
As a result, broad-based knowledge of financial products has become a critical need for key-account executives. They must understand all the possibilities available to their firms, especially with the emergence of unified managed accounts, which employ a wide range of products, including mutual funds, separately managed accounts, alternative investments, exchange traded funds and much more.
Key-account managers must determine how their firms' products fit into or complement the sponsors' various offerings, and convey that to the wholesalers in the field.
With greater responsibilities come superior compensation packages. Increasingly, payment is performance based.
Most models involve a combination of salary and a bonus based on achievement of sales goals. Most often, the key-account person will receive a fraction of 1% on new assets raised.
But compensation is all over the map. Other methods include a percentage on net retained assets or a bonus for winning a spot for a product on a current sponsor's new platform.
Some industry insiders have proposed paying a bonus based on profitability in order to encourage negotiation of profitable revenue-sharing arrangements. Discretionary items - including whether the key-account person is perceived to be a team player - may also affect total compensation.
Key-account managers will play a pivotal role for money managers selling services through major retail venues. They will help to deepen and fortify relationships with sponsors, ultimately ensuring increasing profitability.
Mark Elzweig is president of Mark Elzweig Co. Ltd., a money management executive search firm based in New York. Nancy Miller is its director of client services.
