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Transition to Load Takes Time, Executives Say


For direct-sold firms that want to follow the trend to the adviser-sold channels and develop a wholesaling staff, the good news is that the firms that have done it have not struggled to build and train sales staffs. The bad news, however, is that those transitions took more than a year to implement.

Credit Suisse Asset Management converted its 28 no-load funds to load funds last December, however the firm spent the whole year planning the transition, according to Shiv Mehta, head of product management for the company.

"It took effect on Dec. 12, but we were thinking about this throughout 2001," said Mehta. "We conducted extensive research, talked to prospective and existing clients, and examined the operational issues involved."

And for Credit Suisse, the move into the adviser-sold world was not as substantial a transition as it would be for most firms. The company already had an extensive mutual fund wrap program, so it had been selling to financial advisers for some time, according to Mehta. Credit Suisse consistently hired new wholesalers throughout 2001 in anticipation of the transition and the team now consists of roughly 30 members. However, the move would have been a lot more costly and difficult had the firm not already been engaged in selling to advisers, according to Mehta.

"Realistically, what we wanted to do and what we've now done is strengthen that team so that they're not just selling separate accounts, but mutual funds as well," Mehta said.

Experienced Wholesalers Needed

The most important thing for a firm that's going load to do is recruit outside sales people with distribution expertise in the adviser market, said Ed Sierawski, president of Sequoia System International. Firms need to have at least a couple of experienced wholesalers as a base for a sales team, and finding the right person to head up the unit is essential, he said.

"The biggest reason for a lack of success is trying to have people, who have run the direct side of the business, wake up one day and run the adviser side," said Sierawski. It just doesn't work, the crossover points are not good."

Hired Guns

Bringing in outside, experienced wholesalers was one of the first things that INVESCO did before transitioning its funds from no-load to load, according to Laura Parsons, a spokeswoman for the firm. The firm started developing its sales staff in 1998 by hiring six seasoned wholesalers away from other firms. "We felt we needed to get a strong base," Parsons said.

INVESCO then added 12 wholesalers in 1999, 30 in 2000 and 27 in 2001, and continually divided up the wholesaling regions as the staff grew. Although many of the wholesalers had previous experience, the firm has provided extensive training including work on presentation skills, sales development and product training, Parsons said.

While hiring new sales people can be very costly, this is actually an ideal time to be making such a transition because of the number of people that are available for hire, said Charles O'Neill, a principal at Diversified Management Resources. Due to the recent slate of cutbacks, firms can get their hands on highly skilled salespeople.

"I get calls and resumes daily from wholesalers who have enjoyed very good track records with their firms and, whether due to territorial consolidation or whatever else, have lost their jobs," O'Neill said. "And these are people who already have relationships with financial advisers."

Advertising Cuts

In addition to the potential return on an investment in wholesalers, the move to adviser-sold products has other advantages. INVESCO hired 75 wholesalers in four years, an enormous expense. However, it has also scaled back its direct retail advertising, which can be even more costly, Parsons said.