market opportunityAsset managers are gaining unprecedented insight into the performance of their retail distribution organizations. Just five years ago, they had visibility into only their own assets under management (AUM). It was difficult to know whether to attribute an increase (or decrease) in flows to the distribution organization or to a market shift.

But recently, companies like Market Metrics and Broadridge have introduced products that illuminate the total market and a firm’s market share by fund class, ZIP code and, in some cases, financial advisor or RIA. Market information like this can substantially refine how distribution organizations operate—but only if the information is applied correctly.

Earlier this year, we worked with an asset manager to redesign the company’s sales territories, with an eye toward capturing growth in previously untapped markets. Sales leadership had recently bought market AUM and share data and had decided to “rebalance all wholesaler territories around market opportunity.” The idea was simple and appealing: Align our sales resources with the market, and we ensure appropriate and fair coverage.

However, the company quickly found that it was impractical and unwise to design its wholesale teams strictly around market AUM. Three questions in particular needed addressing:

  1. How accessible is the market opportunity?
  2. Is it practical for a wholesaler to cover the assigned opportunity?
  3. How much sales growth can be expected in the near term?

In one instance, the market opportunity data suggested that a wholesale territory should focus on Manhattan—actually, on just a few wirehouse accounts in Manhattan—given the immense volume of assets managed at these locations. But such an assignment would quickly prove impractical: For adequate coverage, the wholesaler would need to make 100-plus in-person visits to a single large, wire house location—was that practical? And if not, where would the wholesaler spend the rest of his time? If the wholesaler faced access issues with his largest account, would he be able to generate growth elsewhere?

Opportunity alone could not be used to define the territory. Instead, the company defined the appropriate wholesaler coverage for each account, with an eye toward opportunity, but also applying constraints on the frequency with which a wholesaler could be expected to meet with FAs. In addition, the company considered travel constraints, historical sales production and relationship disruption, resulting in an organization designed for the future but mindful of the present. Ultimately, the market opportunity data was essential to the science behind the organization design, but a bit of art was required, too.

Topics: Jason Brown, wholesalers, market opportunity, territory design, territory alignment, financial advisors, distribution, asset management