New York, (October 21, 2008) – Despite current market volatility, the coming year represents a significant opportunity for asset management and insurance companies that are not afraid to invest in their distribution team, according to kasina, a distribution consultant for the asset management and insurance industries. Recognizing this opportunity, 38% of asset management and insurance firms plan to increase their external wholesaling team next year, while only 8% of firms expect to decrease the size of their wholesaling force in 2009.
In a survey of 13 National Sales Managers from a broad range of asset management and insurance companies representing $1.4 trillion in assets under management conducted between October 13th and 17th, kasina found that only one firm (8%) has already reduced the size of their wholesaling force in response to market conditions, and only one additional firm (8%) plans to do so in the near future. The remaining firms (85%) plan to maintain or increase the size of their sales force.
Lee Kowarski, principal at kasina, says, “In previous market downturns, the majority of firms cut their distribution spending only to be leapfrogged by the organizations that increased their investment. I am thrilled to see many firms learn from these experiences and recognize the opportunity to gain competitive positions during this volatile period, but would like to see them take a more strategic approach.”
kasina also found that many asset managers are considering compensation adjustments for 2009, including a net sales-component to reward asset retention (which is already in place at 31% of firms and is being considered for 2009 by an additional 23%) and compensation floors (in place at 23% of firms, considered for 2009 by an additional 31%). National Sales Managers expect the resulting compensation plans to lead to higher overall external wholesaler compensation at 53% of firms, and lower compensation at 30% of organizations.
“External wholesaler comp has often been misaligned with firm’s objectives,” says Kowarski. “When we work with clients to develop a comp plan, we often have to remind the client that the wholesalers’ objectives must be aligned with the firm’s objectives so that salespeople are only paid handsomely when the firm is being profitable.”
“As firms build out their wholesaling team, I would challenge firms to consider more cost-effective wholesaling strategies,” says Mike McLaughlin, senior managing consultant at kasina. “We have found hybrid wholesaling, for example, to be up to 30% more profitable than traditional external wholesaling.”
Additional findings included:
- 31% of firms plan to pay a higher base salary to their wholesalers in 2009 (typically 10-15% higher), while the rest expect to keep the base salary flat
- 15% of firms plan to pay higher basis points on sales to their wholesalers in 2009 – 23% plan lower
- Of the firms that pay a discretionary bonus (subjective or activity-based), 50% expect the bonus size to increase in 2009 (between 5% and 20%) while the other 50% expect to pay out the same amount
About kasinakasina's commitment to innovating distribution in the financial services industry has made it one of the most influential strategy consulting firms in its sector. kasina works with a wide variety of clients from five continents, including firms representing 90% of the U.S.'s total assets under management. An overview of services offered by kasina is available at www.kasina.com.