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Internal Wholesalers - Sorely Needed by Firms and Advisors, but Trapped in Roles

by Eric Daugherty

This week, kasina released Excellence in Distribution: Internal Wholesaling. In this third of five reports in our Excellence in Distribution series, we found that firms face different challenges in their internal wholesaling force than they do with externals (outlined in my prior blog piece).

As an Eagles fan, I remember when Ricky Watters refused to give full effort in a game. When questioned about it, his reply was "For Who? For What?" Firms risk having their internals adopt the same attitude if their jobs continue to demand more, while offering less compensation or promotion upside in return.

Notably, firms have too few internals, relative to their external and hybrid peers. At half of firms, internals support more than one external, on average. And, with firms having let go some externals, internals are doing more selling and servicing than ever before, spending almost as big a portion of their time doing so as externals do.

While a majority of internals aspire to become external wholesalers, only a quarter actually do so. This disconnect between aspiration and reality will become problematic for firms who do not develop a plan to inspire, engage, and retain their best internals - particularly as the job market improves and the competition starts hiring again.

Not only are internals stretched to do more tasks than ever before, but their territories of advisors are unwieldy, which inhibits focus. Firms spread externals over territories that are too large, which inhibits focus. Our research indicates that internals average roughly double the number of advisors on which they can really focus.

On the compensation front, firms' packages are not optimally designed to reward and motivate the activities that are most vital for internals and their firms. Firms indicate that key quantitative metrics for internals include number of calls made and completed, and number of client relationship management entries made. Firms also value important qualitative factors such as product knowledge, teamwork, and call quality. Yet, only 7% of average total compensation is discretionary, not enough to separate the best from the rest of the pack and reward for excellence.

Our FA Vision study and our What Advisors Do Online research indicate that advisors' needs and desires are changing - they are more interested in the quality of wholesaler contact vs. quantity; they are more open to technology solutions to access information and services; and, their time is more at a premium than ever. This bodes well for tech-savvy, efficient internals. Their cost-effectiveness and productivity should position internals to be the stars of the show. Firms intent on keeping their best talent engaged and should revisit their practices regarding their internal sales forces, avoiding the "For Who? For What?" mindset.