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The Changing Nature of National Accounts Compensation

by Lee

Between the discussions at our recent National Accounts Roundtable and the research for our upcoming report on Sales & National Accounts compensation, I see a need for the compensation structures used for National Accounts personnel to be updated to take into account several issues:

• Massive Distributor Upheaval - as we wrote in our latest report, broker/dealer firms and other distributors are in a state of change due to consolidation and mergers, as well as an ongoing platform rationalization process. Compensating National Account Managers only on sales at the specific distributors that they cover is a recipe for disaster, given the limited amount of control that National Account Managers will have on many changes. Asset managers should instead look to use team goals to drive the majority of sales-based compensation, with individuals being additionally rewarded based on discretionary factors, as described below.
• Alignment - many National Accounts Managers are still compensated based on the number (and size) of their "wins". Not all platform "wins" are created equal (just as all speaking slots are not equally valuable), and some opportunities may turn out to be wasted efforts for the firm (e.g. a non-competitive product in a small asset class). Rather than paying for "wins", asset management firms should look to have their National Accounts Managers serve as advocates for the firm's best interests. A National Account Manager that rejects a bad business opportunity should be rewarded for doing so.
• Revenue Sharing - similar to the alignment issue above, most National Accounts teams do not consider revenue sharing agreements and consider all dollars to be equal. Different products, however, have different profitability levels associated with them, and this becomes exacerbated when you add revenue sharing to the picture. A few firms now take revenue sharing levels into consideration and adjust commissions accordingly. In this manner, National Account Managers are most highly compensated when the firm makes the most money.