The 'schmeek' shall inherit the wholesaling world

Meet the "schmeek." Financial advisers' increasing appetite for intricate details about the mutual funds and other investment products that they recommend to clients is forcing wholesalers back to school to learn how to talk to advisers. Today, say experts, good wholesalers need to be able to both schmooze and talk like a fund geek — hence the industry's new moniker, the "schmeek." "They have to be product specialists and understand the analytics," John Cammack, head of third-party distribution at T. Rowe Price Group of Baltimore, said of wholesalers today.
Driving the rise of the schmeek is the move toward fee-based advice and a holistic approach to financial planning, said David Larrabee, senior vice president, territory sales, at American Century Investments of Kansas City, Mo. "It's a very consultative selling model," he said. "This has picked up speed in the last three years." As a result, more advisers are turning to wholesalers for ideas on ways to build their practices, Mr. Larrabee said. "We have seminars that wholesalers can use with an adviser," he added. "That adds value."

INCREASED COMPLEXITY

Also driving the trend, is the increased complexity of many of the investment products now available to advisers, Mr. Larrabee said. "We had to be technical if we're in a wrap product," he added. "The wholesalers need to know how the funds fit into the wrap with the other funds. How will your fund perform under different conditions? Where is the alpha coming from?" The move toward schmeekness is also the result of more sophistication among individual investors and advisers, said John Nersesian, managing director at Chicago's Nuveen Investments Inc. and a member of the board of Investment Management Consultants Association. "The financial world has become more complex," Mr. Nersesian said. "It's not just about buying a stock or mutual fund today. There are so many financial issues." Nuveen goes so far as to call its wholesalers "adviser consultants." "The world of money management in general is evolving beyond just investment selection," said Mr. Nersesian. "It's about portfolio construction, correlation and asset protection."

BACK TO SCHOOL

To keep up with more sophisticated advisers, many wholesalers are signing up for educational programs offered by their employers or outside certification programs. One route is the certified investment management analyst designation offered by IMCA of Greenwood Village, Colo., which covers such topics as investment policy, asset allocation, risk management, tax efficiency, alternative investments and ways to measure return. Over the past decade, IMCA's membership has quadrupled to 7,000 — 85% of whom hold the CIMA designation. A 2007 survey of CIMA designees by Applied Measurement Professionals Inc., of Olathe, Kan., found 8% were wholesalers, said Dede Pahl, executive director at IMCA. "For the wholesaler, having the advanced designation brings that conversation [with advisers] to a new level," Ms. Pahl said. In a study of Internet job postings conducted in the fall of 2007, more than 50% of those seeking candidates with the CIMA designation were for sales positions at manufacturers or asset management firms, she said. While there is growing emphasis on the wholesaler's consultative role, the job's traditional sales component — the schmooze — is still very important, said James Jessee, president of MFS Fund Distributors Inc., the distribution arm of Boston's MFS Investment Management. "People still have to have good interpersonal skills, said Mr. Jessee. "Twenty years ago, the wholesaler would say 'let me tell you about our product performance and expense ratio.' The wholesaler was the primary information source to the adviser. Today, with access to the Internet, the adviser already knows about your performance going in." Sue Asci can be reached at sasci@crain.com.