study, Distribution in a Downturn: Controlling Costs and Making Difficult Decisions
, finds that sales executives have adopted new management and measurement practices to better allocate limited resources in support of key distribution relationships. They have been supplementing traditional sales-based commissions with alternative compensation plans to better align wholesaler behavior with business goals.
The environment for wholesalers continues to be challenging, with may fund firms cutting staff. Indeed, compensation was down in 2002 over the previous year, with the top tier firms cutting wholesaler compensation by about seven percent, according to Bob Kennedy
, vice president and co-author of the study.
The new approaches found in the study include paying wholesalers for meeting or beating a target or projected net flow figure; and for those fund firms with heavy exposure to wrap programs, divvying up commission payments over time, making each installment only if the assets are still on the books.
"Increasingly, wirehouses and other distributors want fund wholesalers to spend quality time in the branch office, working with their brokers and actually training them," said Kennedy. "Add that cost to the hard-dollar access fees and revenue-sharing that manufacturers still have to pay to play, and sales managers have had to become business managers to maximize the return on those investments."
"The primary goal is to bring wholesalers' goals into line with the company's," says Art MacPherson
, assistant vice president and study co-author. "In addition, it's an employee retention strategy. By making up some of the income shortfall of their best wholesalers, sales managers hope to build loyalty that will be remembered and rewarded whenever the market turns up again."
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