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Servicing Independent Advisors with Hybrids

by Lee

Last week, Steven wrote about the increasing shift of advisors from the wires to independent broker/dealers and how many asset managers have had success servicing these reps with hybrid wholesaling. As many firms are now looking to expand (or start) their wholesaling efforts to the independent channel, I wanted to dig a little further into this topic and tackle three key hybrid-related issues:

• Activity: Hybrids should operate primarily from the firm's home office (or from their home), using the phone, e-mail, and Web-based tools to engage advisors. While they should meet with advisors in person, limiting travel to ~35% of the time will provide the biggest bang for your buck.
• Sales Goals: Hybrid wholesalers tend to have sales goals that range from 50-100% those of externals. When focused on the independent channel (especially if a firm is a new to that channel), I would expect a sales target at the lower end of that range.
• Compensation: The average hybrid wholesaler makes $124,000 ($64K base and $60K in commissions/bonus), while at the top end, some firms' hybrids are making $250K. Given the uncertainty of hybrid wholesaler sales targets, especially in a new channel, I would recommend creating a structure in which the commissions make up a smaller percentage of wholesaler compensation relative to the base and bonus.

As we saw in our recent survey of National Sales Managers, firms are planning to expand their hybrid efforts, and we've seen many of those efforts aimed at the independent channel. In order to ensure success, firms must have a clear strategy for who they are going after, what they expect their hybrids to do, and how they are going to compensate those individuals. The firms that have figured this out have been able to achieve significant increases in wholesaler profitability while bringing in a great deal of assets.