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Innovation Hits the Internal Fund Sales Desk

A position once delegated to shuffling papers and answering telephones, the internal wholesaler is taking on greater significance as mutual fund companies search for ways to cut costs, streamline distribution and enhance service for their selling partners. Still, there is a delicate balance between dedicating additional internal resources and maintaining the personal client relations that only an external wholesaler can provide.

"When it comes down to it, face-to-face meetings are what improve sales," said Derek Evans, a principal at the New York-based consulting group kasina, which recently published a white paper on the topic. But even at a major fund company with a small army of wholesalers, "it's simply not possible for them to adequately penetrate the vast number of adviser firms and individual advisers that are out there."

According to kasina, a 40-member external sales force can reach about 8,000 advisers, but there are a total of 500,000 advisers across the country. Uncertainty also exists as to whether the advisers being targeted are the ones that represent the most potential value to the fund company.

Fund companies with sufficient resources could simply hire more externals, Evans admits, but when they command salaries of upwards of $400,000, that oftentimes isn't an option for smaller players. But choosing to place more responsibility on internals, who typically earn around $68,000 annually, requires a shift in duties, a change in how the position is perceived and a boost in compensation.

Lord, Abbett of Jersey City, N.J., added 20 new people to its internal sales desk in 2004, its most active hiring year ever for the position. Paul Schieber, director of internal wholesaling at the 75-year-old firm, said Lord, Abbett considers its 55 internal salespeople an extension of its regional managers. "We view the internal wholesaler as a value-added element of the adviser relationship, a way to positively impact their business," said Schieber, who recalls that when he joined the firm in 1996, its internal wholesalers operated in a largely service-oriented capacity.

But Schieber stops short of calling the changes on Lord, Abbett's internal sales desk an evolution. He considers the recent hiring spate an expansion driven by the changing needs of advisers. Unlike five years ago, when the relationship was primarily product-driven, today's wholesalers must also offer expert insight on emerging trends in the financial markets. And at Lord, Abbett, much of that is coming from the internal sales desk.

"They're an adviser to the adviser," Schieber offered.

They're also providing the road-weary external wholesaler with updates on things like new products or new marketing plans. That means Lord, Abbett's internal sales professionals undergo extensive training, have all of the licenses of a regional manager and can quickly move up the company ladder.

By contrast, Boston-based Investment Capital Corp., a 12-year-old broker/dealer unit of Investor Capital Holdings, is on the hunt for external wholesalers to complement an established internal sales desk.

Without the resources to retain an external wholesaler when it launched its first fund in 1995, the firm instead relied on the proven expertise of veteran fund manager Tom Cameron, former skipper of John Hancock's flagship Sovereign Investor Fund. That gave its internal sales desk the clout to cold call advisers while company President Tim Murphy took care of training them in the image of an external wholesaler.

Like Lord, Abbett, Cincinnati-based Touchstone Funds recently appointed a dedicated internal sales desk manager, Michael Deferro, to coordinate its expansion. The goal is a 1:1 ratio between internal and external wholesalers. The emphasis of the revamped desk, Touchstone President Jim Grifo said, is a qualitative approach to wholesaling by focusing on building and deepening adviser relationships.

But, Deferro added, the primary responsibility of the internal salesperson at Touchstone is still support to their external partner. However, the internal desk has moved from "blanket" support to "giving the external more flexibility to use their unique style to manage their territory. For example, some externals prefer to have an internal who books most of their appointments, while others prefer an internal who specializes in relationship-building and identifying quality prospects."

Those modifications, Grifo added, helped propel Touchstone to the best sales performance in its history last year.

New York Life Investment Management is taking a three-prong approach to evolving its internal sales desk, Executive Vice President Chris Blunt said. It's doubled the headcount from 16 to 30. It's added more than $1 million in tools and technology, like customer relationship management software and Blackberry systems. And it's training internals to execute a focused sales process.

"In the days of the bull market, it was very easy to cast a wide net. Now, targeted selling is much more important," Blunt said. "We don't want our external salespeople walking into the wrong room or the wrong meeting. So it's important to be focused on the people who advance the ball for us."

That's why the firm is also developing a new call model, where, as Blunt said, it's gravitating away from the "eight basic questions" to one that's tailored to specific advisers and can segment them based on a number of metrics, including the depth and breadth of the relationship.

A typical day on the desk at New York Life might still include many of the position's traditional duties, but if a new territory is being built, the salesperson might spend half the day on outbound calls. And not just "thank-you's," either, Blunt said. They might pitch a new product; or, if the call is after a meeting with the external wholesaler, the internal may offer follow-up ideas.

By placing greater responsibilities on the internal sales desk, New York Life has had to alter the way employees perceive the position.

"It's not a junior position any longer. They should be driving the activity of the territory," he said, noting that the firm is banking on a 60% productivity gain with the changes.