blog

Does Your Firm's Internal Wholesaler Compensation Plan Make Sense?

By Jesse Mark

Internal wholesalers are in a tight spot. They are being asked to work longer hours, spend more time directly selling to and servicing clients, but they aren't being paid more. As my colleague Rubesh Jacobs eluded to in a blog post last month, internals are spending approximately 70.0% of their time selling to prospective clients or servicing existing clients, up from 54.0% in 2009. That's a big jump.

But managers have not properly rewarded or incentivized internals for the extra work they are being saddled with. Our latest report, Excellence in Distribution: Optimizing Compensation to Drive Corporate Profitability, shows internal wholesaler's pay is projected to decrease by 4.9% in 2011. While the decrease may partially be the result of internal team expansions and hiring of first-year, lower-paid internals, it nevertheless underscores a crucial trend. Firms are forcing internals to work longer hours and sell more without commensurately higher compensation. What can managers do to raise morale, better align compensation with the individual's value to the firm, and drive profitable activities?

Increase Variable Portion of Total Pay: Comp weighted heavily towards base payments used to make sense for internals because they were not selling to new clients. Today, internals spend equal time selling to new clients and servicing client's existing clients. Firms need to have mechanisms to incent profitable work and reward top performers.

COMPOSITION OF TOTAL COMPENSATION FOR INTERNAL WHOLESALERS

Use objective metrics to determine bonuses: Firms should use scorecards to incent the activities the firm deems most valuable to the short and long-term profitability of the firm. Simple objective metrics like number of calls with focus firms, number of new producers, or measurable product knowledge, incentivize internals to spend time on the right activities with the right advisors.

Create an internal wholesaler team leader position: Internal team leaders are experienced internal wholesalers who function as "player/coaches". Team leaders are involved in sales, servicing, and other internal roles, but also offer advice and training to less experienced internal wholesalers. Creating career paths for internals alleviates consistently high turnover which is costly to the firm and hurts team morale.

It's no surprise that internals feel overworked and underpaid. Firms can implement the three recommendations above to raise morale and create better opportunities for internals. But as firms enter the strategic planning period, they should also determine if internal compensation within the firm aligns with the relative value of the position relative to other Sales positions.