This article is a summary of a session from the Financial Research Associates 12th Annual UMA and Managed Accounts Summit.
The speaker was the Head of Retail Business Development for a mid-Western mutual fund distributor*. The firm has over $20 billion in AUM and they are completely sub-advised.
Four Key Strategies
There are four key elements to building distribution market share:
- A competitive suite of offerings
- Home Office Relationships – obtain research coverage in addition to endorsement from the home office
- Holistic coverage model/tactical plan
- Ability to influence advisor behavior through thought leadership
These are the firm’s 2014 sales objectives, but they could be used by any distributor looking to boost their market share:
- Increase the number of offices penetrated in each wholesaler’s territory
- Double the number of producers in offices where they currently do business
- Increase the number of advisors who own more than one fund
- Increase the number of advisors with greater than $100K invested
On the retail side, the firm focuses on five firms; Morgan Stanley, Merrill Lynch, UBS, Wells Fargo and LPL Financial. The wirehouses provide scale, but that comes paired with velocity, which can become an operational issue. LPL adds ballast to their business since independent advisors are more inclined to buy and hold.
It is not enough to just have an endorsement by the home office for your SMA strategies or mutual funds. You must get research coverage so your offerings become candidates to be included in UMA’s.
Research coverage provides an added level of credibility that advisors look for when they select options from the models provided by the home office. This is one of the ways that the firm increased the number of their funds that were being offered on discretionary platforms.
Tactical Focus on Regional Gatekeepers
Gatekeepers are people who know where assets are and can influence advisor behavior. They include wealth management specialists, consulting groups specialists, productivity specialists, and the internal sales desk. Sales efforts are most effective when concentrating on these people using a systematic approach.
One recommendation was that distributors review their marketing budgets to ensure that every dollar is being spent wisely. One area that can often be cut is sponsorships of those ubiquitous booths at client’s conferences.
There is little to no evidence that these sponsorships support any sales objectives critical for distributors, the speaker contended. Most of this money can be reallocated to sales where it can be used to build grass-roots initiatives, hire dedicated field resources and improve access to the state-level gatekeepers. This will increase the sales pipeline and provide a bigger boost to revenue.
While some existing clients might be unhappy at ending their sponsorships, the message can be turned around and used as a selling point. The sales team should explain that the firm is making investments in field staff, which will ultimately benefit the home office.
A Competitive Suite of Offerings
Qualifying the value being delivered is a critical step in the process of acquire more quality clients, the speaker explained. Meeting the psychological needs of goals-based wealth management clients requires offering a wide range of products to meet different client demands.
One of the first initiatives undertaken by the new head of retail distribution was to increase the firm’s product lineup from 3 to 35 funds covering 20+ Morningstar style categories. A number of their funds are now ranked by Morningstar as 4-5 stars and three funds were recently approved by Morgan Stanley research with another two funds approved at Merrill Lynch. It is easier to obtain approval for your products when they have the backing of one or more nationally-recognized research providers.
Intellectual leadership is also important. Development of training classes for the local client market is an initiative where sub-advisors can be leveraged. Field resources should work closely with clients’ wealth management specialists to determine location and participation rates. Offering practice management coaching sessions with the best advisors in each office is a way to stand out from the crowd.
They implemented additional measures to increase internal accountability, such as tracking the number of days from first meeting to sale, conversion rates and return on investment (ROI) of their retail sales force. The conversion rate for the sales team of 21 external and 16 internal wholesalers increased to 18%, which has helped keep the ROI of the retail business inline with the 28% level of the overall firm.
To facilitate reaching the goals set for the team, they transitioned they sales organization to something they call, ”intelligent wholesaling”. This methodology requires spending time to understand the details, especially the psychology of sales.
Human nature often drives the sales process, the speaker pointed out. People do business with people they like, so the question is “how do you create like?” This can be accomplished by planning conversations with your clients instead of simply presenting them with sales pitches.
Other aspects of ”intelligent wholesaling” include:
- Knowing everything about your competition – locate their strengths and weaknesses and facilitate decisions by distinguishing yourself from them;
- Identifying what works and why and then leveraging it – don’t stick with your current process just because it is what you have always done;
- Using client segmentation to target those opportunities that can have the greatest impact on sales.
Any firm on the distribution side of the business should be able to make use of the advice provided in this session. These are the kind of sessions that I feel deliver the most value. Where the speaker provides detailed recommendations based on real-world experience and has concrete examples to back them up. Sharing best practices is one of the reasons we go to industry conferences and this presentation was one of the best I have seen.
There were only about fifty or so people in the room for this session. By providing this brief summary, I hope that more people are able to benefit from this knowledge transfer.
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* The speaker for this session did not reply to emails from myself or FRA requesting approval to include their name in this post.