Wholesaling efforts are falling short, report says

Feb 26, 2007 @ 12:01 am

By Aaron Siegel

NEW YORK — Asset management firms that employ wholesalers are not reaching their full sales potential and can do a lot more to form stronger relationships with financial advisers, according to a report released earlier this month by kasina LLC.

The report found that 87% of sales managers did not know the percentage of assets coming in through their own wholesalers in a given territory.

A hypothetical firm with 50 wholesalers and a sales target of $100 million per territory could generate $1 billion in additional sales by improving the efficiency of its wholesaling team by 20%, according to the report, “Separation Anxiety: Differentiating the Wholesaler From the Territory.”

To become more efficient, firms need to understand the full potential of their wholesalers, to evaluate the results delivered by those wholesalers and to translate those results into some sort of long-term plan.

“Wholesaling firms need to apply more rigor to wholesaling potential and allow managers to set more-effective targets,” said Derek Evans, a principal at New York-based kasina.

“Wholesalers should have deeper relationships with advisers,” he added.

The report also found that asset management firms need to re-examine their use of territory gross sales to set goals and to evaluate the performance of their wholesalers.

In other words, it is better to forge more-profitable relationships with fewer advisers than less profitable relationships with more advisers.

Ideally, according to the report, wholesalers should aim to generate 75% of their sales in a single region from just one adviser.

“It is important to make the determination, and take the time and effort, to think about the territory and how they are looking to get service from an organization, and use it to plot out wholesaler metrics,” Mr. Evans said.

The report suggests that companies can bolster the efforts of their wholesalers by devoting more resources to behavioral analysis.

They can alter the behavior of their wholesalers by encouraging the development of so-called behavioral score cards and by tying compensation more closely to behavior.

Two classes

“I can divide wholesalers into two classes — those who get it and those who don’t,” said Michael Kresh, a certified financial planner at M.D. Kresh Financial Services Inc. in Islandia, N.Y.

“We are financial advisers. Wholesalers have to understand that we look at the world differently than a broker.

“Over time, a wholesaler drumming up business in a wirehouse is usually very poor at communicating with a financial planner.”

Mr. Kresh added: “If they don’t have a product that is worth representing, they are not going to get my business.”

His firm manages more than $100 million.

“Half of wholesalers come in with random funds that they are trying to promote, while the others are looking for more solid information,” said Thomas Balcom, a CFP at Foldes Financial Management Inc., a Miami firm that manages $350 million in assets.

“They have become more efficient and need to understand what the individual is looking for, and [it] saves a lot of time and a lot of trees, too,” he said.

Some feel that wholesalers already are hitting the mark.

“Wholesalers have very good insight and are such a great clearinghouse for information,” said Mike Kickham, a CFP at Porter Kickham Inc. in Chesterfield, Mo. “I find, in the brokerage community, that there really is an appreciation on the part of the wholesalers for the expertise that planners have, and they listen and respond to us.”

Porter Kickham Inc. manages $40 million in assets.

The interviews for the report, which were conducted in November, looked at 17 wholesaling firms managing $2 trillion in assets across an array of products.

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