Unlocking Real Value Blog

Is the Time Right to Target New Sales Channels?

Published in Ignites – An Information Service of Money-Media, a Financial Times Company

Written by Andy Klausner, CIMA, CIS, the founder of AK Advisory Partners LLC., a strategic consultancy serving the wealth management industry.

For asset managers looking to diversify into new distribution channels, it is important that they do so carefully and with a well planned-out and researched strategy. I urge caution because the characteristics of advisors vary greatly from channel to channel.

Expansion into new segments should be done in the context of the total marketing and support resources the firm has available — both internal and external. It also needs to be done with the assurance that operational capabilities will not be stretched. A well-thought-out plan prior to expanding distribution channels will increase the odds that any new foray is successful.

Let’s look at the three primary channels: the broker-dealer, registered investment advisor (RIA) and bank segments. Many asset managers have a long history of serving the broker-dealer world. One of the distinguishing aspects of this channel is that the concentration of advisors in offices (and often complexes) makes it easy for the external marketing representatives of asset managers to leverage their time by seeing multiple advisors quickly. This convenience has in fact increased with the consolidation of the industry, where now many broker-dealers have multiple offices in the same city.

In contrast, advisors in the bank channel are more spread out (often traveling themselves between branches). Therefore, getting in front of multiple bank advisors easily is often difficult, if not impossible. The same is generally true in the RIA channel as well, especially among the independents. From this marketing perspective, the decision of an asset manager to enter the broker-dealer channel is a much different one than the decision to enter either the RIA or bank channels.

Asset managers looking to enter the RIA and bank channels may be better served looking for alternatives to hiring a large external marketing force.

Perhaps their strategy should be focused more on developing a powerful internal marketing team that utilizes phone, e-mail, the Web and other electronic methods of communication. One tactic may be for these internal teams to forge relationships with RIA and bank advisors and thus assist the external marketing forces in leveraging their time. Such a strategy also highlights the importance of developing strong ties with the home offices of sponsor firms in order to “earn” slots at larger firm-sponsored meetings. Consider that at these events a large number of advisors will be in attendance.

As the above example illustrates, the key to success in expanding into new channels is to develop a comprehensive business plan first so that resources are allocated where they will be utilized the most effectively. In fact, the events of the past year have forced many firms to reassess the channels that they have been already been participating in. From this perspective, and as part of this analysis, it might be a perfect time to consider entering new channels if doing so would create synergies with the existing business.

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