Digital Transformation: Less Than the Cost of an External Wholesaler

Often, when my team meets with a new potential asset manager client, the first question is how much it will cost to execute a fully-integrated digital marketing and sales strategy. But before I discuss the costs associated with the digital transformation process you will go through as an asset manager, it’s essential to understand why you must do it.

No Other Options

In today’s competitive world of raising capital through relationships with advisors, most asset managers recognize the traditional model of wholesaling is becoming more expensive and less effective every year. Fees are compressing, margins are squeezed, and advisors rarely take phone calls from wholesalers anymore. 

The propensity for advisors to research and find solutions to their problems online, rather than rely solely on wholesaler insights, began years ago and was only accelerated by the pandemic lockdowns and work environment revolution. Most asset managers understand that digital engagement is the preferred choice of interaction by advisors today.  Yet many firms still struggle with how to embrace a digital approach that doesn’t alienate and disrupt the sales team.

The “dial-and-hope” wholesaling model practiced for so many years will no longer work, so when evaluating the cost of transforming your distribution model, it’s not so much a question of “how much” but rather “how to.” Advisor behavior has forever changed, and there won’t be a reversion to the advisor/wholesaler relationships of yesteryear.

DIY or Outsource

Recognizing that digital transformation is essential for you to compete today, you may wonder if you should build your platform with internal staff or outsource to a digital firm that works with asset managers. But, of course, there are pros and cons to each approach.

Building an internal team to manage a “digital distribution” program allows you to take advantage of your subject matter experts to create compelling messaging and content that resonates with the right prospects at the right time. On the other hand, running an effective digital distribution program generally requires sizable teams with many specialized skill sets. A full-house digital team may cost $1 to $2 million yearly, including payroll, benefits, taxes, and additional overhead.

Outsourcing can offer the advantage of hiring a ready-to-go team with all the requisite skills to build and launch your digital platform quickly. And the cost of outsourcing is typically less than the annual expense of one external wholesaler. But if you select a firm unacquainted with financial services intermediary distribution and the asset management industry, you are inviting frustration as the learning curve can be painfully slow.

Large asset management firms are those most likely to have the internal talent and financial resources required to build and consistently execute a digital distribution model. Conversely, smaller firms and boutique asset managers generally have neither the desire nor internal skill sets to undertake such a sizable endeavor and may prefer to outsource.

Parsing the Costs

Outsourcing a digital transformation project can be accomplished for less than the cost of an external wholesaler. But, first, I want to be clear that digital distribution is not about replacing wholesalers but rather helping them to be more efficient and productive. More importantly, it’s about using your dollars wisely to engage advisors the way they prefer to interact today.

Too often, I still see asset managers add wholesalers with the hope they will raise more capital for the firm. Instead, the more salespeople a firm adds without fixing the fundamental problem, the less profitable it becomes. More wholesalers working an antiquated model that doesn’t engage advisors simply adds expense. 

While I can’t tell you exactly how much it will cost to build a complete digital team internally, I can tell you from experience the cost of outsourcing your digital transformation. To substantial our claim in this post's title, 78% of wholesalers earn over $350,000 a year, and our team has consistently executed asset management digital transformation programs at far lower costs. 

Allow the Statistics to Work in Your Favor

Are you still questioning the need for a digital transformation of your distribution model? Consider this and recognize that advisors are very much a part of these statistics:

Implementing a digital platform that aligns with how your prospective advisors' research, analyze, and make asset allocation decisions can take your distribution program to the next level. Learn more about digital transformation by watching our 5-part educational video series, How to Grow Your AUM with the Power of Digital Distribution™