It's a common headache for fund firms. A wholesaler sells some funds to an advisor, gets a commission for the sale, and soon after the advisor redeems the funds -- depriving the firm of the management fees.
In a big shift from the old sales paradigm, BlackRock
has shaken up its sales compensation packages to encourage flows to buy-and-hold clients, retail head Frank Porcelli
declared during the Reuters Global Wealth Management Summit
according to the newswire
Porcelli said that BlackRock, since the beginning of the year, now pays commissions based on "net" sales, instead of the old practice of paying a percentage of gross flows.
The shift is meant to move flows away from high-volume fund traders, for example advisors at brokerage firms.
According to the Reuters
article, firms have been hesitant to make the change for fear of losing sales talent.
However, firms have become more willing to shake up their sales strategies recently. For example, firms are embracing big data supplied from firms such as Broadridge
, Access Data
. They are using this data to focus sales on high opportunity clients, as well as more accurately gauge wholesaler flows to better calibrate commissions.
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