Distribution Channels Committee
Newsletter Issue 1 – 2nd Quarter 2005
Keeping Score
by Joseph V. Maugeri, SEI Investments
For firms selling through intermediaries, the current environment
has never been more challenging. Gone are the days of trying
to contact as many advisors as possible in a given year. With
over 8,000 mutual funds in the marketplace, and numerous tools
that allow for full transparency of holdings and performance,
advisors are increasingly becoming more selective in choosing
which wholesalers gain access to their office.
From the wholesaler's perspective, there are limits on how
many appointments can be achieved in a given time period.
As a result, today many firms realize that fewer, deeper relationships
with advisors are more productive and profitable.
In addition, firms have learned some critical lessons over
the years. The first is that not all advisors are the same.
Not only are there different business models and appetites
for certain products, but there are also advisors that are
more valuable to a firm from a customer value standpoint.
How do you measure an advisor's value? With the right technology,
firms can quickly and cost effectively put a system in place,
allowing them to rank advisors consistently, and utilize the
system across the sales force. It should include both qualitative
and quantitative factors and above all be tied in with the
firm's CRM system. In this way, those advisors that truly
are looking for a longterm relationship with the firm will
“rise to the top” of the ranking.
If properly utilized, the scoring system will provide management
with additional insight and allow them to make better business
decisions. For example, from a bottom line standpoint, it
makes more sense to let internal teams handle advisors considered
low potential until those advisors (and their overall ranking)
improve to justify the expense (and time) of face-to-face
meetings.
Ranking the Advisors
Most firms already have some ranking system that they use
for advisors. It may be as simple as A, B and C levels of
advisors and be based on assets and/or sales with the firm.
This system in many cases is not uniform and relies on the
wholesaler himself to evaluate and rank the advisor. This
leads to inconsistencies and a heavy reliance on subjective
factors, possibly causing confusion and conflict between the
wholesaler and upper management.
A better way is to have one system that all wholesalers
have been trained on, is incorporated into their CRM system
for capture and retrieval and has incentives tied into for
reporting accuracy.
It should be clear, however, that ranking the value of an
advisor is not an easy task. Quantitative factors such as
gross sales, net sales, assets and the advisor's AUM all should
play a role in the overall scoring. Qualitative factors such
as degree of “center of influence” within their
branch, the advisor's degree of conviction about the fund's
story and their ability to grow assets in the future should
also be ranked. These are much tougher to rank and obviously
subject to debate in some cases. This can usually be resolved
by clear definitions of the subjective factors so that everyone
is using the same criteria.
Managing the Process
To be successful, management must be actively involved in
the process. This will help to ensure that wholesalers recalibrate
the scores periodically. At a minimum, the internal and external
wholesaling team(s) should re-evaluate the scores annually.
Some firms choose to do this quarterly or make it more event-driven
(e.g. a new large sale or redemption, or after a recent meeting).
With any method, consistency needs to be maintained or the
value of the scoring system will be undermined over time.
Once the scores are developed, activity tracking needs to
be linked to these scores to measure productivity. A report
that shows the ranking (say 1-100) with the number of meetings
YTD can be a catalyst for the sales manager to speak with
the wholesaler about the rep in question. If the goal, for
example, is six meetings per year for advisors scoring in
the top quartile, then by June, three meetings with those
high-scoring advisors should be expected. Having the sales,
redemptions and assets on that same report is also helpful
to see if the scoring needs to be recalibrated.
Implementing a Scoring Model
Ultimately, for any segmentation system to succeed, it needs
to be a win-win for both management and the sales force. For
this reason, communication is a vital part of any implementation
plan. From management's perspective, the scoring system should
over time lead to more productivity and better profitability.
In addition, better targeting of productive advisors, as well
as having fewer conflicts about coverage and marketing support,
should translate into a better overall working environment
between management and sales.
Initially, wholesalers may perceive the new scoring system
to be an infringement on their autonomy. Communication from
management should emphasize how the new system will allow
the wholesalers to look at their territories from a new perspective.
By looking at both quantitative and qualitative factors and
applying it consistently across their advisors, subjective
ranking is reduced and the wholesaler's best prospects should
rise to the top of the list. Over time, this should translate
into more sales and increased compensation. In addition, wholesalers
can now more easily rationalize to management why certain
advisors receive more meeting time and why these same advisors
should be invited to due diligence conferences. These benefits
to the wholesaler notwithstanding, management may need, in
the early stages, to tie financial incentives to the proper,
periodic calibration of the wholesaler's advisors to ensure
compliance and utilization of the new system.
For firms today, distribution represents a significant investment
with no guarantee of success. A key part of any strategy needs
to be a deliberate, focused sales effort targeting the right
producers with the right message. Ranking your advisors and
managing your wholesalers to this same ranking will allow
you to increase sales and build deeper relationships over
time. For firms lacking this capability, they will need to
invest in new CRM systems or partner with providers with expertise
in this area. For those firms willing to adapt to this changing
world of distribution, the rewards will be greater profits
and productivity over time.
Joseph V. Maugeri is Director of Marketing and Distribution
Support Services for SEI Investment's Investment Manager Services
group, which provides outsourced distribution solutions to
investment management firms. He is frequently quoted in industry
publications and is also a member of NICSA's Distribution
committee.
This material represents the opinion of the manager
and is not intended as investment advice or to be a forecast
of future events. This article is not intended for use with
the general public. © 2005 SEI Investment Developments.
Inc.
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.
|
