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Ensuring Effective Divisional Sales Managers

By Lee Kowarski

At kasina's National Sales Manager Roundtable last week, one of the most heated discussions was about the role of divisional sales managers. As I wrote in a blog post 18 months ago, the most effective wholesalers are not always the most effective managers, and the NSMs at our Roundtable had all experienced this issue first hand. Throughout the discussion, several questions arose that a firm must answer in order to get the most out of its divisionals:

What are the characteristics of a great divisional?

• While there is agreement in the industry that effective divisionals need a strong background in wholesaling, this does not mean that a divisional needs to be a "top" wholesaler. In fact, many firms have found that star wholesalers often do not make the best divisional, just as star athletes typically do not make the best coaches (see Gretsky, Wayne or Thomas, Isiah). Two of the most desirable traits for a potential divisional are a desire to be a manager and demonstrated effectiveness as a manager.

How should divisionals spend their time?

• Divisionals are typically asked to travel with wholesalers, hire for open territories, review expense reports, open doors for their wholesalers by building relationships with distributors' regional personnel, and much more. At some firms, divisionals also meet with key advisors and present at important meetings (often because they miss wholesaling, not because this is a desired role for the divisional). It is crucial that firms have a shared understanding of the role of, and priorities for, divisional sales managers. While the specifics can vary depending on the firm, the role needs to be consciously defined and measured so that the right people can be hired, expectations can be aligned, and the appropriate number of wholesalers can be assigned to each divisional.

What training is provided to divisionals?

• Most firms provide new divisional sales managers with extremely limited training. What training is offered often focuses on systems and processes (e.g. reviewing expense reports). For divisionals new to this role, it is critical to include training how to effectively coach and provide feedback, as well as expectations for the divisional and their wholesalers. They need to be taught how to assess and develop their wholesalers and how to effectively get buy-in from their team without undercutting "management". Even experienced divisionals are likely to benefit from this type of training when joining a firm, as well as on an ongoing basis.

How does the National Sales Manager work with divisionals?

• With all of the myriad activities a National Sales Manager (NSM) is tasked with, it is rare that an NSM gets to spend a sufficient amount of time working with his or her divisional sales managers. Given the large investment firms make in their wholesaling forces and the huge impact a divisional sales manager can make on wholesalers (either positively or negatively), NSMs should commit time to developing their divisionals. If a firm is effective at identifying and training impactful divisionals, retention soon becomes a critical issue - one that NSMs can help address by spending time with their divisionals

The 2012 update of our annual report on external wholesaling will include more details about the evolution of divisional sales management. Surveys for this research are going out this week to sales management across the industry. If you are interested in participating, please contact your relationship manager at kasina or e-mail research@kasina.com.

What I Learned from Asset Management Conference Season

By Lee Kowarski

Between Labor Day and Thanksgiving, it seems like every organization in the asset management and insurance industries hosts a conference. Between FundForum USA, IRI, MFWire, MMI, NICSA, kasina's own Distribution Summit and e-Business Roundtable, and many more events, the amount of information can be overwhelming. Here are three key themes I observed throughout conference season:

• Compensation is Changing - For the first time, I heard CEOs talking publicly about the need for changes in how wholesalers are compensated. The inherent flaws in compensating purely on gross sales is nothing new, but this Fall marked the first time that senior executives openly discussed the need to evolve compensation models to pay on net sales (or a proxy) and activity metrics in addition to gross sales.
• Increased Focus of the Home Office - Industry conferences used to focus almost exclusively on discussions of product and wholesaling. This year, nearly every conference had multiple sessions focused on the ever-increasing role of research analysts at the major distributors and how asset managers and insurers can best support their needs. Firms are recognizing that, as our research shows, 62% of advisors' AUM are already influenced by the home office and this figure will increase to 77% by 2015. This will require firms to rethink, and to invest in, their National Accounts teams.
• The Importance of Digital - While I will never get used to hearing the word "tweet" coming out of senior executives mouths, it is gratifying to hear so many industry leaders talking about the importance of digital strategies to their organization. From websites to social media efforts to mobile initiatives, marketing is taking on a larger role in organizations and is increasingly becoming digital.

Now off to enjoy a quick break from the conferences for Thanksgiving and then it's time to get ready for kasina's sold out National Accounts Roundtable next week!

Margins, Comp, and Technology Advances take Center Stage at kasina's Distribution Leadership Summit

By Lee Kowarski

It is an exciting time to be in Distribution at an asset management firm. Threats and opportunities abound. Threats - profitability is under attack as subdued markets make asset growth more difficult, distributors put the squeeze on revenue sharing, and astute, deep-pocketed competitors use technology to advance all aspects of the business. Opportunities - evolving distribution for a new landscape, using technology to drive segmentation, and the new horizons of mobile devices and social media all allow firms to distinguish themselves.

Yesterday, kasina hosted its annual Distribution Leadership Summit, where we had 21 senior executives together to learn from kasina and each other. We had a wide-ranging discussion about the future of distribution in the asset management industry and I thought I'd share highlights from a few of the conversations that stood out to me:

• Margin Pressure is Increasing - with asset managers' operating margins at 29% and distributors' operating margins at 14%, firms are feeling significant pressure from their distribution partners. Many are being asked to provide their least expensive share class (typically I shares) but to pay the "full" revenue share (what the revenue share would have been on A shares). Distributors are also asking for more in terms of marketing support. This trend is unlikely to reverse until there is greater margin parity between asset managers and distributors.
• Compensation Philosophies are Evolving - we are finally getting to point where most firms recognize that the traditional commission-heavy comp plans for wholesalers need to evolve. While many are only now working on modifying their plan, the compensation philosophy at most firms has evolved to recognize that in an uncertain sales environment, it is critical to incent effective behaviors (e.g. cross-selling, focusing on the right advisors, retention, etc.), as well as gross sales. Firms are also recognizing that National Account-driven platform wins are playing a greater role in attracting assets and such allocations require refinements to compensation plans.
• Technology Plays a Bigger Role - when we hosted our first Distribution Leadership Summit a few years ago, few of the National Sales Managers and Heads of Distribution in attendance mentioned technology. Even the CMOs in attendance were more focused on offline marketing. Yesterday, technology was central to the discussion. From capturing data about advisors (through CRM systems, the Web, 3rd-party data sources, and elsewhere) to analyzing that data to developing segmentation strategies to delivering information online (via Web sites, e-mail, and social media), technology has become central to firms' distribution efforts. Nearly every firm in attendance recognized the opportunities to add scale and efficiency to their business by being smarter about how they use technology.

These were just a few of the conversations at the Distribution Leadership Summit - others will be discussed on our blog in the coming weeks.

We host several roundtables throughout the year - if you are interested in attending one in the future, e-mail roundtable@kasina.com