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Psych 101


When hiring a new wholesaler or making organizational changes to distribution teams, most fund companies don't consider wholesalers' ids or egos, but maybe they should.

The psychological make-up of a fund company's wholesaling force may have a profound impact on its ability to adapt to an industry undergoing dramatic change. That change stems from a weak economy and an evolution from a transaction-oriented business to a service-based business dominated by new, complex products.

Psychology is important because the success a wholesaler has in a particular channel is often a function of his or her personality type, according to Dr. Joseph "Chick" Marshall, a managing partner with Resource Management of Boston. Marshall's firm advises all types of organizations on everything from how to improve sales, as was the case with Fidelity Investments, to counseling the Green Bay Packers on how to win Super Bowls. With Boston as its headquarters, not surprisingly, much of Resource Management's business focuses on financial services, Marshall said.

A wholesaler's personality is more important in today's industry than ever before because of a shift in business over the past couple of decades, Marshall said. The days a fund wholesaler could count on sales simply by providing a product and a snazzy presentation are a thing of the past, Marshall said. "In the '80s and early '90s all you needed were some bodies and someone that could make a sales presentation because there was such a small amount of product," he said. "Now there is product saturation and [intermediaries] are looking for business partners."

That requires fund companies to field smarter, more thoughtful wholesalers. In addition, as evidenced by the number of fund companies adopting wealth management services, future growth in the industry is widely believed to be in separately managed accounts and alternative investments--products that are highly complicated and which require a certain type of wholesaler, Marshall said.

Fund wholesalers that cut their teeth in the last two decades are facing the proposition of adapting to the changes or eventually finding themselves relics of a bygone era, Marshall said. Those wholesalers need to learn how to transition from being a product provider to a service provider, he said.

Some Better Equipped Than Others

But because how a wholesaler sells is a reflection of who that wholesaler is as a person, change can be difficult, Marshall said. For instance, wirehouse wholesalers are accustomed to the quick, transactional sale because that is the nature of their business.

Brokers work in a fast-paced environment and like to buy from wholesalers that reflect their work environment. Eighty percent of a wholesaler's ability to be successful depends on their ability to mirror the values of his or her customer, he said. But as the industry adds more complicated products that require a greater degree of customization like separate accounts and wrap programs, the wirehouse wholesaler needs to adapt to a slower, more thought-out sales approach.

That will be extremely tough for some because it requires essentially masking who they are, Marshall said. "They will have a real tough time transitioning," he said. "They will need to turn themselves inside out to be something they are not."

Better equipped for the evolutionary changes taking place in the industry are wholesalers who serve financial planners, banks and trust departments, he said. Successful wholesalers in these channels are accustomed to dealing with a market that requires thought-out business plans and who have an in-depth knowledge of complicated products. Planners and trust departments tend to be a little more skeptical and cautious and need to develop a relationship with a wholesaler before adopting a product, he said.

However rare, there are some types of people that can successfully adapt their sales style to mirror any type of client in any type of channel, he said. That type of personality makes up about 15% of the general population and is even harder to find in the wholesaler population, Marshall said.

Another change in the industry that is forcing many wholesalers to examine how they sell is industry consolidation. In an effort to cut distribution costs and watch the bottom line, many fund companies are breaking down product and distribution channel silos to create one-stop shopping for their clients. Cloaked as an efficiency, such moves cut costs, but place the impossible demand on the wholesaler to morph their sales style to meet all types of distribution channels, Marshall said.

While it is true that wholesalers must adapt their sales style to become more on the order of an investment professional adept at relationship management, the strong wholesalers will likely succeed in the new environment, said Charles O'Neill, a principal with Diversified Management Resources, an executive search firm based in Boston that serves the financial services industry.

"The challenge becomes not just understanding a complete line of products, but understanding alternative products and understanding the total world of funds and how those fit into a clients' product requirements," O'Neill said. "The bottom line is, business is more complex."

What is likely to develop is a wholesaler who represents a melding of the buy and sell sides, O'Neill said. That's because wholesalers will be required to represent the portfolio manager in front of private clients and will therefore need to understand more complex issues than they have in the past, he said.

That does not mean, however, that the wirehouse wholesaler has no place in the evolving industry, he said.