Most people in “sales” within the Asset Management industry probably started out working on an internal sales desk. You were cold calling Advisors, banging out 40+ calls a day, and trying to generate interest. If you were successful, you got called up to the big leagues and became a wholesaler. Now with COVID-19, and all this virtual working, you are now back to being an internal. And this poses multiple problems for you.
Problem #1 – Many firms I have spoken with are having record gross flows, but they are still in net redemptions. This is the worst “catch-22” of your career. Why? Because here is what your CEO is observing:
- Wholesalers aren’t traveling, yet I am experiencing significant gross flows.
- Most likely, I am only paying commissions on gross flows, and these folks are making a great living.
- My overall revenue is down, given I am experiencing net outflows.
- I am not sure this is the intended consequence of my compensation structure.
- Why am I paying these wholesalers so much money? They aren’t traveling.
- Do they even need to travel?
- What is the difference between a wholesaler’s activities right now versus an internal’s?
- Perhaps I need to rethink this distribution model.
Problem # 2 – Don’t think your pre COVID routine will EVER be the same. It won’t, and here is why. You have proven you can work efficiently and effectively from your house. So have Financial Advisors. All the major wirehouse firms are analyzing the savings of downsizing their commercial real estate footprint, and they will ultimately decide that it is more effective/efficient to have limited office space where FA’s can occupy them on an ad hoc basis…like a WeWork facility.
Wholesalers will be that last people permitted into these offices because they are a liability (health reasons), and it will not be an efficient use of your time to visit these offices since they are never going back to full capacity. Plus, do you really think branch managers care about your presence in the offices? Do you believe that they think you are adding value and generating revenue to their bottom line?
When you combine Problem #1 with Problem #2, it does not bode well for external wholesalers. Layoffs are coming, but not until the end of the year or 2021. Firms will not want the bad press of laying people off during this crisis. So, they will wait until things subside and then downsize their distribution efforts. Trust me on this one – it is coming. CEOs will see that their wholesaler’s activities are not what they used to be and are already scratching their heads, wondering why they have so many internals (yes, they are counting you as an internal right now). T&E budgets will be dramatically reduced because they aren’t needed, and, over time, the traditional wholesaler role will warp into a Hybrid position. Why? Because you will never have the opportunity to travel the way you used to, and your CEOs will not compensate you for activities you can no longer conduct.
You can disagree with these observations, but I know that if I were running Distribution at an Asset Management firm, I would be proactively strategizing how I want my team to look like and how I think they could be the most productive in this changing landscape. I would conclude that the traditional activities of a wholesaler are long gone, and implementing a Hybrid model is my best option.