“Hybrids” start to gain traction with annual salaries reaching $180k; more firms consider moving to “net sales” for externals, where top producers earn over $500k
NEW YORK, January 23 – While asset acquisition remains the predominant driver of wholesaler compensation in the money management industry, more firms are starting to consider asset retention and the profitability of distribution relationships as well when calculating overall pay packages, according to a study released today by kasina, a leading consultant to the industry.
For the study, “Wholesaler Compensation” kasina conducted more than 30 interviews with senior sales executives at 15 major asset management firms with over $2 trillion in assets under management. In nearly every organization, the firm found that the external wholesaler was the most highly compensated member of the sales team. Base compensation for these individuals ranged from $65,000 to $98,000, with variable compensation bringing total income to between $225,000 and $500,000 or more. The vast majority of the variable compensation was determined by gross sales.
kasina noted that the “hybrid” concept � which combines internal and external roles and requires generating sales from within the home office � has started to gain some adherents. Base hybrid compensation ranged from $54,000 to $65,000; variable compensation based on sales productivity added $80,000 to $100,000 to the overall package, according to the kasina study.
Industry must catch up with market changes
In spite of this modest gain by hybrids, the kasina report concluded that current wholesaler compensation models have changed little since the mid-to-late 1990s, an unprecedented period of growth for the industry during which the emphasis was almost exclusively on gathering assets. The authors point out, however, that the market environment has changed substantially over the last few years with the result that asset retention has become an increasingly important area of focus for firms.
“The competitive landscape has shifted dramatically, while firm compensation strategies are just starting to catch up,” said Steven Miyao, chief executive officer at kasina. “Going forward, we believe we will see more and more firms emphasize profitability and asset retention, rather than asset gathering, in their wholesaler compensation models.”
The kasina report provides a framework for moving the industry to compensation strategies that more clearly align wholesalers and regional sales managers with the strategic goals of the asset management firm. In a section called “Emerging Compensation Trends,” the report looks at four broad areas: Profitability vs. Productivity; Movement to Net Sales; Incorporation of Discretionary Compensation Measures; and Broadening Expectations of Internal Wholesalers.
“How an individual is compensated defines in a very large measure the priorities of the firm. For that reason, modifying a compensation model can be an enormously challenging task. With this report, we have tried to provide both a business rationale for change, and a blueprint for moving forward,” said Charlie O�Neal, chief executive officer at Mutual Fund Careers, which contributed to the study.
kasina is a management consulting firm that is focused on helping financial services companies create intelligent relationships with their investors and intermediaries. By combining knowledge of distribution trends, technological innovations, and marketing strategies, kasina aids leading asset management firms with front-office efforts and publishes a regular schedule of cutting-edge industry research. kasina�s client list includes 18 of the 20 largest asset managers in the United States and leading firms in Canada, France, Germany, and the United Kingdom.