Discussing his firm’s recent sales turnaround, Highland Capital Management President Brad Ross credits an "aggressive hiring plan" that will result in 20 field-based wholesalers, 10 internals and four hybrids. Since the hiring started in late 2012, he notes, "the firm has increased sales every month this year."
A key component of Highland’s turnaround strategy hinged on one fundamental idea: adding salespeople adds sales. This may sound obvious, but it’s a point often overlooked by asset managers and insurers looking to drive growth. Too often I see companies searching on the margins for gains—looking for a slight uptick in sales efficiency or effectiveness—when the fundamental issue they face is that their sales investment is woefully undersized.
Think about a typical external wholesaler territory in your own organization: How many financial advisors are included within the territory? How many would you want your wholesaler to speak with, if he or she had the time? If your company reflects the norm in the industry, my guess is that there are hundreds or even thousands of advisors covered within the scope of each wholesaler territory.
And while many of those advisors might be relevant, your wholesalers are probably only touching a small fraction each year. If your sales are lacking or your market share isn’t growing, the explanation might simply be that your sales efforts are undersized relative to the opportunity.
I don’t want to suggest that adding wholesaler headcount always leads to profitable new sales—as with any promotional effort, there is a point where the cost of the promotion exceeds the incremental returns. (The point of excess can be reasonably estimated by studying the relationship between wholesaler activity and asset flows or market share.)
But I’ve worked with a number of firms to study the size of their sales organizations, and I’ve yet to come across an asset manager whose wholesaler team was oversized relative to the market opportunity.
As a first step, insurers and asset managers should at least quantify the impact of their selling efforts, and evaluate their wholesaler headcount relative to the market opportunity. The cost of such an analysis is small, and the impact—as Highland shows—can be substantial.