WITH THE LACK of support from all but a handful of broker dealers, providers and especially their network of wholesalers have become the key support for both experienced and inexperienced advisors. But the method of wholesaling developed by mutual fund companies over 30 years ago has not seen a major overhaul since its inception, taking into account the technological revolution and not taking into account the differences in the retirement market. While no one is suggesting that the wholesaling system be scrapped, neither can anyone argue that it does not need a major overhaul.

Before mobile phones, computers and the internet and companies like Lipper and Morningstar, it was essential that mutual fund wholesalers travel, meet and educate advisors about their funds. These meetings and relationships became an important way for advisors to be kept current and entertained. Some financial service companies still rate their wholesalers on the number of advisors they meet each week, which might have been a good measure at some point in history when the market was not mature. Additionally, DC plans had been a nice compliment to mutual fund sales made directly to retail advisors, but now they are the number one source of new assets.

So what changes might be made given modern times? First, wholesaling to the retirement market should be treated differently than the retail market. While a great percentage of advisors regularly sell mutual funds or variable annuities, only 50% of all advisors have ever sold a retirement plan and less than 7% have more than five plans under management. Yet do wholesalers get more “points” based on the types of advisors they visit with arguably a deduction in points if they visit a blind squirrel that is not sitting on a nut? If the three pillars of DC plans are record keeping, investments and education, it is less important for wholesalers to extol the virtues of their platform, because record keeping has become a commodity, investment platforms are wide open and education has failed. There are less problems and more good solutions than ever.

Experienced advisors don’t want constant visitation and sales pitches, and they no longer need the flexibility of the wholesalers’ expense account which is becoming more limited anyway given current regulatory scrutiny. What they want is help with sales prospects when requested; help with practice development and management; and limited problems with current clients that, when they occur, are addressed quickly. Through the phone and the internet, much of what the wholesaler had been tasked with is accomplished by internal wholesalers. Less experienced advisors need training and tools, not dinners and lunch meetings.

The best and the brightest of our industry are among the ranks of wholesalers, yet too many marginal ones are compensated for following the old rules and have been fooled by randomness. For the good wholesalers to excel, they need comprehensive internal support, state-of-the-art practice development and management tools along with access to training and networking events appropriate for the level of experience of the advisor. They should be compensated more on new sales especially with experienced advisors not currently working with them while receiving appropriate credit for keeping good, profitable clients happy. They should no longer be judged by their frequent flier miles, expense accounts or for being in the right place at the right time.

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