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Territory Prophet

by Derek

In formulating ideas for our newest whitepaper on wholesaling, one of the things that we spent time thinking about was managing territories against profitability, not just production. For many organizations, profitability is something that is largely confined to the senior corporate offices.

To explore the issue further, we spoke with the Heads of Distribution and Sales Managers at a number of asset management firms. What we found is that few firms are infusing the idea of profitability into their sales organizations. Very few are concerned with expenses beyond keeping an eye on T&E.

In an ideal situation, we feel firms should be paying more attention to the expense side of the equation to get closer to Intelligent Distribution. To improve profitability, firms should set territory-specific expense allocations instead of a blanket, equal division among territories. Firms should infuse a profitability mentality into their wholesaling teams so that they are managing a territory budget instead of just concentrating on gathering assets.

However, few firms are in an ideal situation. In fact, we feel that it is too early for firms to be implementing a detailed P&L for their territories. While most firms track T&E for compliance reasons anyway, harder expense buckets to allocate are fulfillment, marketing and transaction costs. Some firms are currently implementing systems to get a better handle on fulfillment costs and how they tie back to specific territories, but how do you tie value-added programs, transaction costs and the Web site, for example, to specific territories? Is it really worth the time and resources to push it down to the regional or territory level?

While we advocate getting a better handle on expenses, and we are in favor of concepts such as making the wholesaler CEO of his/her territory and increased Sales Manager diligence, we feel that it is too early for the asset management industry to implement territory P&L. Instead, in addition to monitoring T&E, firms should start infusing profitability at a conceptual level throughout the distribution organization so that managers, wholesalers and other distribution personnel start thinking more within that framework and look for any practical ways to track and control other expenses as opportunities arise.