Changes Asset Managers are Planning to Make to Wholesaler Compensation

Most asset managers recognize that their current compensation schemes are outdated.  Gross sales commissions do not adequately reflect the health of the business and are falling out of favor as the driving metric for sales success.  In addition, the past few months have seen a catalyst in advisor interest in—and even demand for—remote engagements with asset manager sales teams, which have highlighted that the metrics used to evaluate activity must also change.  Our recent survey shows 56% of asset managers are considering changes to their compensation structures and nearly every asset manager is rethinking how to measure sales success. 

Changes to compensation structure: Asset managers desire compensation structures that more closely align with profitability.  While most don’t expect immediate changes to the amount of compensation salespeople earn, they are preparing to better align compensation components with sales behaviors.

• Nearly 6 in 10 asset managers expect to reduce the percent of overall compensation represented by gross sales commission.
• Instead, these firms are looking to increase net sales (36% of firms), retention bonuses using a metric other than net sales (45%), and quarterly and annual bonuses (33% and 27%, respectively).

Changes to KPIs:  For years, asset managers have been moving away from gross sales as the predominant factor in salesperson compensation.  That trend will continue over the next 18 months.

• Using net sales to measure success: more than 8 in 10 asset managers say net sales will be more important as a metric in compensation components than it has been
• Focus on new business: 
  • 9 in 10 firms will place more import on metrics measuring net new clients,
  • more than 7 in 10 firms expect net new assets to play a larger role in the future,
  • 87% of firms will place more significance on the number of top producers that a sales team manages.

Redefining activity metrics: Sales managers are moving away from defining quality interactions as in-person meetings with an advisor.

• 53% of asset managers expect the frequency of remote meetings with advisors will be higher post-pandemic. 
• To accommodate this phenomenon, many are changing how they define quality interactions from in-person meetings with advisors to any interaction with an advisor that moves the relationship forward in the buying journey.

Changing compensation, in a material way, has been a challenge for asset managers—with fee compression and other pressures on what asset managers can earn from advisor relationships, everyone recognizes the need to makes changes but no one wants to be the first to make changes and risk losing their top performers.  Eventually, the market dynamics will require such a shift and asset managers are re-gearing their compensation plans in preparation.

For more information about how the distribution landscape will change in the coming years, contact us.