More than a quarter of fund wholesalers don’t understand their compensation plans, and fewer than six-in-ten believe those structures encourage them to spend time with top advisors.
Ignites Research surveyed 125 external wholesalers of mutual funds and ETFs at 72 different asset managers, and found that only 73% of them felt they understood their compensation plans. Moreover, only 59% of the externals in Ignites’ survey agreed that their comp structures encouraged them to spend time with the top advisors.
On the other hand, when Ignites Research separately surveyed sales leaders at 31 asset management firms, 87% believed that their wholesalers understood their comp plans, and 68% of fund execs believed wholesalers’ comp plans led them to focus on the top advisors.
Compensation plans can have a number of components, including variations in the mix of the steady, variable and deferred portions, commissions that may vary by product or distributor, and other factors. Poorly understood compensation plans are less likely to influence sales behavior in the way that fund executives intend, according to the report.
Ignites Research recommends fund executives examine whether the sales pay plans are too complicated or if they just need to be explained better.
