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Wholesaler Loyalty - Greatness is Not Just About Size

By Hari Krishnaswami

The BlackRock Storm

A recent Ignites article commenting on the sizeable investment BlackRock is making into their wholesaling efforts, has made other clients think "do we need to do the same? After all, their wholesalers get such strong marks from advisors...". Indeed they do, in the latest FA Vision report, BlackRock's Externals are rated highest for advocacy. Simply put, clients of BlackRock, more than any other firm in our survey, would recommend their wholesaler to a friend or colleague.

But before you storm into your COO's office to demand additional headcount, consider this, the firm with the second highest wholesaler advocacy was Putnam. Wait - Putnam - you think, that's the firm that was doing really well, then had some big problems and now is in the midst of a multi-year turnaround by CEO Bob Reynolds. The success of Putnam's wholesalers to create such strong loyalty reflects the commitment of Reynolds to turn Putnam around. But even more, it sends a signal to the rest of the industry that you can create loyalty from your advisors without having to have the largest wholesaling force.

So What Creates That Loyalty?

We surveyed advisors in our FA Vision study about what they consider to be the most important attributes of a wholesaler. The results are interesting and may surprise some. Those in the industry recognize the importance of wholesaling, and that for intermediary sold businesses, field sales are critical to firm success. However, the business of wholesaling is changing. Advisors are placing a premium on wholesalers who come prepared to discuss their products, do the best job of being available to their advisors and follow up effectively. Interestingly enough, advisors rate the connection with their wholesaler on a personal level near the bottom, with ability to conduct client meetings scoring the lowest of all attributes.

How Do You Create Loyalty Without A Large Wholesaling Force?

So if being available and effective follow-up are among the most critical attributes that advisors seek in their wholesalers, some may wonder how firms like Putnam are able to achieve such high loyalty. The answer is that in today's age, availability and follow-up are not defined by physical presence. In fact, firms can support advisors effectively through the phone and with a strong Web site. Not only can they do that, but they should, as advisors tell us most forms of interaction that are not about physical meetings are more important to them.

When asked to rank the importance of various communication modes with asset managers, telephone support scored highest, followed by Web site, email and then in-person. Advisors are demanding strong follow-up but prefer NOT to meet their wholesaler to achieve that follow-up.

Why Loyalty?

Loyalty is a critical focus of our advisor research because our data shows that loyal advisors are critical to driving flows. Putnam realized while turning around products can take time, focusing on an effective wholesaling force (supported by a best in class Web presence) can create an immediate impact on turning around the Putnam brand. It will take time for the Putnam story to play out, however, what is clear is that creating loyal advisors can be done fairly quickly and does not require the kind of investment that BlackRock has made. 2 years ago, only 22% of Putnam clients were advocates of their wholesalers, now that number has risen to 51.7% - an improvement of over 200%. Who wouldn't sign up for that?