Distribution Channels Committee
Newsletter Issue 1 – 2nd Quarter 2005
The Hybrid Model of Wholesaling
by Lee S. Kowarski, kasina
When an industry reaches just a sliver of its potential
market, there is clearly room for growth. Such is the case
with asset managers and advisors, where the average external
wholesaler can conduct 20 meetings and the average-sized team
of 40 externals can accomplish 400 meetings, but they still
only reach 8,000 advisors out of an advisor base estimated
at 500,000. Changing the wholesaling structure and the underlying
compensation structure is critical to taking advantage of
this opportunity.
The Hybrid Model
The leading edge of the industry is quickly moving away from
the traditional service-oriented wholesaling model in which
the internal desk is used almost exclusively to support externals.
The emerging Hybrid approach places greater sales responsibility
on the internal group. It is characterized by innovations
like advisor profiling (using behavioral data), strategic
selling, and a broader use of technology.
Getting the right infrastructure in place is critical to
creating an effective Internal Sales Desk. Among the most
important considerations in changing behavior is how the new
breed of internal wholesalers will be compensated. The new
compensation structure should be designed to achieve at least
two major goals:
- Reward sales growth driven by the Internal Sales Desk
- Foster a greater sense of teamwork across both the internal
and external sales forces
Achieving this will require developing new formulas to strike
a more dynamic balance between base and variable compensation.
Lining up the ducks
The good news is that more and more firms are moving to realign
the Internal Sales Desk in pursuit of a broader slice of the
market. At the same time, however, most have not yet reorganized
their compensation programs to drive performance in pursuit
of the newly evolving sales and marketing goals. Without that
alignment, the programs are unlikely to ever reach their full
potential. Therefore, firms should:
- Emphasize sales-oriented variable compensation as an addition
to base salary
- Align compensation with corporate goals by incorporating
elements of company and territory success
- Add more components to variable compensation to balance
individual/team variable components
Lee S. Kowarski is a Principal with kasina, a management
consulting firm for the financial services industry. For more
information on the Hybrid Model, you can contact kasina at
research@ kasina.com or 212-349-7412. © 2005 kasina,
LLC.
For more information about the Distribution Channels
Committee, contact the Committee co-chairs:
Martin Griffn, PFPC Inc.
martin.griffin@pfpc.com
Sue Ellyn Idelson, Fidelity Investments
Sue.Ellyn.Idelson@fmr.com
To contribute content for upcoming newsletters, contact
Ellen Weinraub at NICSA at eweinraub@nicsa.org.
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