The annual Productivity Insights report published by DST kasina denotes a few clear trends in investment product wholesaling that are already emerging as a result of the Department of Labor (DOL) fiduciary rule, among other ongoing shifts in regulation and client expectations.
At a high level, financial services firms are changing their salesforce compensation structure to regulate total returns for their sales teams and reflect their evolving corporate goals and strategies, explains Steven Miyao president of DST kasina. Many firms are shying away from commission-based structures in favor of “base and bonus driven compensation.”
A lot of the pressure to make such a transition comes from the DOL fiduciary conflict of interest rulemaking. According to Miyao, the DOL-driven reforms may be uncomfortable for some providers in the short term—those wedded closest to the commission structure will naturally feel the most pain—but in the end the transition will be healthy for investment product providers, leading to “improved net sales, as salespeople will be incentivized to nurture relationships with advisers who will hold their assets longer.”
The Productivity Insights report finds that asset management sales teams expect to achieve slightly lower gross sales but better net sales results in 2016, leading to lower total compensation for salespeople.
“Firms are restructuring their compensation procedure to lean towards higher base and bonus payments in order to address the decline in total compensation, which is dependent on gross sales commissions,” Miyao explains.
The potential for a drop in sales compensation next year comes after total compensation increased 2% to 3% in 2016, DST kasina reports. The average firm today has 104 salespeople who are expected to bring in $24.8 billion in gross sales and will receive $21.7 million in total compensation.
Important for advisers to note, more than 30% of asset managers “acknowledge their CRM system needs cleaning up as duplicates and inactive advisers decrease the productivity of their sales efforts … The average sales team does business with just 17.3% of advisers in their CRM.”
“Firms understand the need for more in-depth and efficient data and analytics when it comes to their advisers,” Miyao concludes. “In meetings with clients and at our roundtables, senior sales executives want accurate, timely information about opportunities with advisers—and they expect sales teams to leverage this data as part of their sales planning and rotation.”
Additional research findings and information is online at www.kasina.com.