The culture of mutual fund companies doesn’t help. For most investment shops, wholesalers’ training focuses on making smooth presentations and dressing well. In other words, it’s all about grooming. Wholesalers also struggle to differentiate their products, which isn’t surprising considering that thousands of mutual funds exist.
The challenge can be even greater for advisors when funds on their shortlist have similar performance. Advisors with larger wirehouses or regional broker-dealers often get some help from gatekeepers or due diligence teams, yet the mutual fund and wholesaler process can still be daunting.
Not surprisingly, advisors can screen candidates by seeking wholesalers that offer helpful services in addition to leading mutual fund products. The trick for advisors, of course, is to know how to find substance among wholesalers who are shaped by an industry that often emphasizes form over substance.
The First Test: Listening Skills
Wholesalers often focus on presentations skills, so they may neglect to practice listening skills, which can make them unable to determine advisors’ specific needs. With that in mind, advisors should show a preference to wholesalers that actively engage them in questions about their business. For example, does a wholesaler ask advisors about the demographics of their client basis?
Such a discussion is more than just idle small talk. After all, advisors with a younger client base may need help with tuition planning and saving for retirement over the long-term, while advisors with older clients will need help with generating income for retirees, business succession planning, and estate planning. Wholesalers who fail to establish those facts, therefore, are less likely, or even unable, to deliver relevant services to advisors.
The Second Test: Depth of Services
Advisors should probe wholesalers to determine the range of services they can provide. For example, can a wholesaler help an advisor create a client advisory board and prepare special events for clients?
Advisory boards can help advisors assess demand for services, such as tuition planning, budgeting assistance, estate planning, and saving for retirement. Advisory board members, furthermore, typically become very loyal clients because they have invested time and energy into helping their advisor with their businesses. Board members should be provided with engaging events, such as presentations on equity markets and relevant financial planning topics. Financial advisors should therefore ask wholesalers if they can provide investment team members or support for the presentations and other experts for discussions of financial planning topics.
In a similar manner, advisors should determine if wholesalers can provide continuing education services. Registered reps, Chartered Financial Analysts, Certified Financial Planners and advisors who hold insurance designations are just a few of the financial professionals who are required to satisfy annual continuing education requirements to maintain their licenses or designations. As part of the screening process, advisors should therefore ask wholesalers if they can deliver programs that will help them meet continuing education requirements.
Advisors may also consider evaluating if wholesaler offers services to help evaluate the best mutual fund share class for individual clients and questions regarding practicing, including the financial impact of switching from a commission-based operation to fee-based compensation.
The Third Test: Depth of Portfolio Info
Fund firms often struggle with determining how much time portfolio managers should spend managing portfolios versus meeting with clients or communicating investment information to wholesalers. Clearly, portfolio managers need to stay focused on running money, yet they must also be able to communicate their thoughts on markets and explain positioning of their funds.
Financial advisors, understandably, need to know that they can promptly receive answers to questions on portfolio matters, especially when clients are questioning market developments or fund performance. With that in mind, financial advisors should ask wholesalers to describe their firm’s culture. Do portfolio managers conduct frequent web presentations or conference calls to describe their views on markets and to discuss portfolio positioning? In a similar manner, financial advisors should determine if wholesalers have sufficient access to investment team members so that they can research questions from clients.
