As financial advisors abandon their traditional transactional-based business model for something more holistic, one key player has largely failed to keep up: the wholesaler.
As Ray Scalafani, founder of ClientWise, an executive coaching firm for wholesalers and advisors in Tarrytown, N.Y., puts it: “There is a massive need in the industry for the transformation of the wholesaler. Wholesalers, generally speaking as an industry group, haven’t kept up with the changing role of the advisor. Their behaviors simply aren’t changing fast enough.”
Historically, the wholesaler’s product pitch was built, according to one pundit, on “steak, whiskey, golf and an American Express card.” Not to mention the ubiquitous “booth babes,” hired by firms to draw attention to their products at industry conferences. While that model is in decline, wholesalers have been slow to reinvent themselves.
A Wholesaler Top 10In its wholesaler effectiveness survey of February 2007, Horsesmouth/Financial Research Corp. – which jointly operate Advisor Insight – rank 33 firms for high-quality wholesaler interactions with advisors. The top 10 are:
1. DFA2. GE Asset Management3. Russell 4. John Hancock Funds5. Transamerica IDEX 6. Charles Schwab7. Legg Mason8. MainStay Funds9. JPMorgan10. BlackRock Funds/Merrill Lynch
As an example, 10 LPL Financial advisors, meeting as a study group recently, couldn’t stop talking about how they are being pummeled by aggressive, non-helpful wholesalers. One wholesaler actually got in front of the group at an earlier gathering, presenting what amounted to a “worst practices” demonstration.
“Between us, we probably manage a billion dollars and this guy was like a video of what a bad wholesaler does. He just rattled on. He was unprepared. It was all about him, not about us,” notes Tiff Joyce, principal of Joyce Financial Management in Sebastopol, Calif.
“We’re happy to talk to somebody if we’re going to learn something, but please don’t come in and tell me why your growth and income fund is better than their growth and income fund,” Joyce adds. “I have clients with brain tumors. It’s heavy-duty stuff. Unless you have something unique to share, we don’t have time for you.”
Joyce’s remarks put a face on some telling statistics.
The Horsesmouth/FRC Wholesaler Effectiveness Survey of February 2007 also ranks 16 value propositions compelling enough to convince advisors to select one wholesaler’s products over another. The top three: 1) Takes a solution-oriented approach to me and my clients rather than pushing product. 2) Understands how I do business. 3) Offers ideas based on what’s working for other advisors. Interestingly, product itself doesn’t show up until the sixth-ranked item. [See sidebar.]
Clearly, quality wholesalers can wield a lot of influence.
In a related finding, an Advisor Insight survey on marketing effectiveness earlier this year showed that nine out of 10 advisors believe the wholesaler should have some involvement in the delivery of a value-added program. But here’s the challenge, as spelled out in the study’s executive summary: “With such a large percentage of advisors desiring wholesaler participation in the delivery of VAPs, it will present firms with a difficult task of balancing program content that is deemed independent while involving personnel that are normally so closely tied to product and the generation of new assets.”
In this developing landscape, forward-thinking wholesalers are becoming more of a partner or consultant to advisors, according to Craig Kilgallen, vice president of Boston-based Financial Research Corp. and director of its Advisor Insight research surveys. He said some firms are encouraging existing wholesalers to get chartered financial analyst and certified financial planner designations and, as they hire, they are looking for candidates with MBAs. Kilgallen even advocates for banning the term “wholesaler” because of its salesy connotation.
“I’ve always been a big believer that wholesalers do make a difference as long as they are doing the right activities. Today, going out to dinner or golfing do not constitute the right activities,” says Kilgallen, himself a wholesaler for seven years. “The wholesaler must really understand the advisor and what their world looks like. It gives you a huge advantage.”
Among the changes in this new playing field:
For starters, the sale today ideally is an intellectual, client-need-focused sale. Next, the really savvy wholesalers are promoting value-added programs on everything from referrals and target marketing to capturing IRA rollovers and retirement income. There’s also been a rise in prominence of the internal wholesaler or sales desk, supporting in deep ways both the external wholesaler as well as the advisor.
“The whole character of the game has changed. By definition, it has to be more professional. The advisor is looking for tools. It’s no longer a slam-bam sale,” observes Lou Harvey, who heads the Boston consulting firm, Dalbar. “In the not-so-old days, you’d have events with motivational speakers and booth babes. Now, you’re seeing much more technical material presented — white papers, third-party papers. The whole environment is becoming much more serious. We haven’t lost the golf balls yet, but we’re definitely moving away from the wholesaler’s stock and trade to something altogether different.”
What the Advisor WantsThree years ago, the advisors at First Financial Strategies in Denver banned wholesaler meetings.
“In our office, the average tenure is 17 years and we’re kind of beyond the traditional wholesaler-advisor relationship,” notes Phil Lubinski, a certified financial planner. “We as a group said basically we don’t want any more wholesaler meetings. We’d eaten all the doughnuts we could stand and we didn’t need any more golf balls or golf shirts.”
Today, Lubinski looks strictly for technical support from the wholesalers with whom he does business.
“It’s not an advisor’s favorite thing to read the prospectus of 10 different investments. You become dependent on the wholesaler to explain how this new investment works,” he says. “You can’t eliminate your source of information. There’s not enough hours in a day for the advisor to research everything out there and still make a living advising.”
Which is exactly the point.
What do advisors want from wholesalers? Time efficiencies.
As Dan Maurer, senior vice president of marketing and professional development of Curian Capital, frames it: “If we’re successful, we have advisors saying: ‘Wow, they’ve obviously listened and they are addressing this in everything they do. They’re providing me with measurable time I can bring back to the business; I can coach my son’s Little League team; I can spend time with my grandkids. They’ve given me my time back.’”
Not coincidentally, a study last year by Denver-based Curian Capital, which provides fee-based separately managed accounts, found that 89 percent of 850 independent financial advisors surveyed spend less than half of their work time in front of clients and prospects. Curian routinely polls its advisor-clients, tweaking its offering accordingly. Due out this month: a retirement income planning survey.
Mark Cortazzo, senior partner at Macro Consulting Group in Parsippany, N.J., says a good wholesaler provides a triple value: access to information, problem-solving and efficiency.
“The most important thing is that the wholesaler understands who you are and what your practice is about, and shares ideas that are relative to what you do. Also very important, and this is one most miss, is telling you the Achilles heel of their product or their program, talking with you about where this doesn’t work,” Cortazzo says.
“One of the things that still amazes me is that probably in every other conversation I have with a wholesaler, I will ask them a question and get an ‘I don’t know, no one ever asked me that before.’ That’s shocking. Usually, it’s a question that you couldn’t utilize that product or program without knowing the answer to,” he adds. “Wholesaling can be one of the best or one of the most frustrating experiences an advisor has.”
Tiff Joyce gets a minimum of four calls from wholesalers a day. Thursdays and Fridays are heavier. The best way to get in his door: through another advisor’s referral.
A helpful wholesaler operates, he says, like “a little intelligence network,” offering not only practice management support but innovation.
“It’s more about the plan and the process for financial advisors, than the pieces and the products. What do we really need? Now that can be very useful,” Joyce adds. “Sometimes, I feel kind of bad. A lot of us started off in the sales world. I understand what they are going through. But I’m so busy taking care of my clients’ lives, it’s got to be something valuable and useful. Keep plugging away, but base it on what we need, not on what you think we need.”
A ‘Value Add’ Wish ListWhat do advisors want most from their wholesaler? An Advisor Insight wholesale-effectiveness survey, conducted jointly by Horsesmouth and Financial Research Corp. (FRC) in February 2007, makes it loud and clear. Here’s the sweet 16, ranked top to bottom in significance:
1. Takes a solution-oriented approach to me and my clients rather than pushing product.2. Understands how I do business.3. Offers ideas based on what’s working for other advisors.4. Offers ideas on how to market business more effectively.5. Offers ideas on how to run practice more efficiently and productively.6. Able to explain how his firm manages money differently from competitors.7. Provides compelling materials to use with clients.8. Offers ideas on how to use his firm’s products in complementary way.9. Offers ideas for penetrating niche markets.10. Offers insights on broader marketplace.11. Understands competing peer products.12. Doesn’t hide issues that could cast his firm in less favorable light.13. Able to explain how his firm’s products would affect risk-return balance.14. Anticipates issues that may create client anxiety and helps me be better prepared to handle inquiries.15. Provides investment and/or market research.16. Understands how my firm’s recommended list and platforms work.
Up next: Financial Research Corp. is currently updating its wholesaler effectiveness survey, issued last year. The revision will ask advisors this key question: Do your requirements for wholesaling increase or decrease in turbulent markets and are firms responding to those increased or decreased needs? The update is due out at the end of September.
Wholesalers Weigh InLast year, Marc Socol was the top wholesaler in the Dallas region for Jackson National Life Distributors. Today, he’s the firm’s regional director, in charge of 25 wholesalers in the western half of the U.S.
As he sees it, product manufacturers are beginning to realize that their top wholesalers have transcended the traditional business model, operating less as product pushers than consultants.
“Advisors demanded it. Advisors want great wholesalers,” he says. “When an advisor tells you: ‘Here’s my situation. I’ve got client X who wants to get from A to Z, is your product the right fit?,’ hopefully a lot of time it is. But you’ve got to be able to mention products that aren’t necessarily your own. What you’re searching for is the best solution. One of the key things in the relationship between the wholesaler and the advisor is trust. If he believes you’re giving him your best advice, he’ll trust you more. If a product out there is a better fit, you bet I’m going to give that advice.”
In addition to serving as a product solutions specialist, Susan Torrisi, senior regional vice president for DWS Scudder, partners with her advisor-clients. In some respects, she is an extension of their team. In her words, she is “kind of a coach” and a “concierge” for their wealth management and business development platforms.
“I’ll fight for the right product to be distributed,” she says. “I won’t tolerate anything mediocre.” She has even called competing wholesalers to line up products for her advisors. She hosts practice management meetings. At one recently, she assembled her best advisors’ assistants, coaching them on issues such as time management. She hooked up one advisor who was looking for an office makeover with her interior designer, and set up another advisor with a girlfriend of hers. The advisor and her friend have been dating for a year. She’s also given etiquette training, teaching advisors how to act in a social setting with high-net-worth clients.
“The word is value. If I can’t show an advisor how to make money and to get a quality of life, they don’t need me. And there are probably 30 people behind me banging on the door,” she says, “I have the best clients. They are loyal to me and I am loyal to them.”
Ed Sierawski, president and founder of Naperville, Ill.-based Sequoia System, has been training wholesalers since 1996. Sierawski, who wholesaled in the 1980s, says it’s easy to pinpoint what advisors today do not want from a wholesaler: more product, lack of industry knowledge, poor relationship skills.
“If you had to generalize about what the largest area advisors need help with, it’s practice management. You better have some way to help with practice management, even if it’s just a sliver of it,” he says.
“Five years from now, this will be a different place for the wholesaler to be. You won’t be able to pursue an activity-based strategy alone: How many people did you see? How many appointments did you make? Those days are gone essentially,” Sierawski adds. “Trouble is people are still working that way. The large majority of wholesalers still work under that paradigm.”
Thoughts on Wholesaling”Managers of wholesaler forces recognize it’s more than just trash and trinkets right now. It’s really a focus on the business relationship.”– Mark Tibergien, CEO, Pershing Advisor Solutions
“Wholesaling is becoming a much better occupation, a much more prestigious occupation, a much more satisfying occupation. It’s an occupation people will stay in forever because they enjoy it now.”– Chip Roame, managing principal, Tiburon Strategic Advisors
“I’m in demand for what’s in my brain, not for golf.”– Susan Torrisi, senior regional vice president, DWS Scudder
“I think you are going to see, in the industry, companies stepping back and asking: How are we going to afford these huge fleets of wholesalers that add cost to the product? You are going to see the model reengineered. People are going to take the wholesaler model and tweak it. It’s less about selling than helping advisors improve their business.”– Laurence Greenberg, CEO, Jefferson National Life Insurance Co.
Freelance writer Ellen Uzelac is based in Chestertown, Md.; the former West Coast bureau chief and national correspondent for The Baltimore Sun, can be reached at firstname.lastname@example.org.