Change is in the air for wholesalers, thanks to the mutual fund scandals and recent banning of directed-brokerage practices by the SEC.
Boston-based Financial Research Corp. recently said in a study that the changes will go beyond increased disclosure — which it too expects — and advance into the realm of a more efficient, cost-managed business.
Specifically, the study shows that as companies develop better metrics to track wholesalers and their costs, the business will change from one of personal relationships to one of streamlined efficiency.
“It's all about the segmentation of resources,” says Art MacPherson, an editor at FRC and co-writer of the study. “People are realizing that you can get real quantitative analysis of how effective a wholesaler is.”
The study references the old 80-20 rule, with the idea that with improved monitoring, wholesalers will have to concentrate their efforts on the relationships that matter, leaving the middle ground to others.
That's not to say that personal relationships will cease to be important to wholesalers. It's just that the indulgences they might have gotten away with in a less-efficient market will be eliminated, thanks to technological advances in monitoring their costs and general cost-cutting and watchdogging. And, MacPherson says, that might not be such a bad thing.
“It's like when people switched from typewriters to computers, and some people never made the move,” MacPherson says. “And others said, ‘Hey, this is much better.’ More information is always better, and the days of driving miles to see clients that aren't bringing in much money are soon to be over.”
