American Funds to expand sales force aggressively

Fund giant takes another step to win back investors

By Jason Kephart

Sep 23, 2013 @ 1:26 pm (Updated 2:05 pm) EST

American Funds plans to increase its sales force by 25% in yet another step to win back investors.

Last week, the company announced that it would begin increasing the transparency around its investment process for the first time, including publishing reports about how its portfolio teams are created.

The sales team will grow to around 145, up from 115, over the next six to eight months to help the company cope with the evolving adviser business model, said Matt O'Connor, director of distribution in North America.

“The way advisers conduct business today is just fundamentally different,” he said. “Their expectations have gone up. They expect us to know more about them, more about their options and the platforms they use. It's much more of a consultative conversation.”

At the heart of the evolution is the trend toward fee-based compensation models.

Wirehouses and regional brokers, which traditionally have been American Funds' core clients, quickly adopting the fee-based model, which has changed the way they interact with asset management companies.

“It has absolutely changed the interaction with the adviser,” Mr. O'Connor said.

American Funds isn't the only asset management company that's been reacting to the shift toward fee-based advisers. The Vanguard Group Inc., which leapfrogged American Funds as the largest mutual fund company after the financial crisis, began the process of doubling its sales force to 220 last year.

Unlike Vanguard, however, American Funds has been dealing with a wave of redemptions across its mutual funds. Since 2008, investors have pulled out more than $240 billion, including $11.5 billion this year. Its total mutual fund assets had fallen to $993 billion as of the end of August, from $1.15 trillion in 2007, according to Morningstar Inc.

Mr. O'Connor said the changes were not caused by the outflows.

“This is not a reaction, it's a renewed commitment to advisers,” he said.