Mutual Fund WholesalersWith roughly $16 trillion in total assets under management, mutual funds are clearly American’s investment vehicle of choice.1 But with over 7,000 mutual funds in existence, have you ever wondered how the mutual funds you own actually ended up in your brokerage or retirement account?

Chances are your financial advisor or company retirement plan sponsor has interacted with a mutual fund wholesaler. If you’ve never heard of a mutual fund wholesaler, you’re not alone.

Similar to an investment consultant offering advice to pension funds, foundations and endowments, a mutual fund wholesaler offers expertise on particular products to financial advisors and money managers.

Wholesalers represent major mutual fund families like Fidelity, Vanguard and Franklin Templeton and solicit their funds to for inclusion in client accounts. There are also several independent wholesalers including Multi-Funds, Inc., Mainstay Investments and Curian Capital.

A wholesaler is employed by the mutual fund itself, and is traditionally a business development (sales) role. Through incentives, they can influence the individual mutual funds offered in your company 401(k) or the funds pitched to you by your financial advisor in a brokerage account.

The RIA-Wholesaler Relationship

Many financial planners are moving away from their broker-dealers and wire houses towards independent firms or Registered Independent Advisors (RIAs). RIAs take on a more holistic approach to managing client assets, adding tax strategies, insurance and estate planning to their services. As such, a wholesaler must be able to speak the sophisticated language of today’s RIA.2

Wholesalers can no longer use rudimentary sales pitch derived from fund fact sheets and bracket information. Now that this information is readily available online, wholesalers have had to adapt and up their game. The key is offering products that can complement complex client needs. For RIAs, its finding the right number of wholesalers to work with-too many wholesalers can complicate your strategy but having too few can compromise objectivity.

Rebranding the Wholesaler

Wholesalers used to be the entertainers, wining and dining financial advisors while pitching their funds. Today’s wholesalers are still salespeople, but must also wear financial analyst hats given the complexity of today’s mutual fund strategies. They eschew the reputation of wholesaling as strictly a sales role and are reinventing themselves as consultants.

Many wholesalers pursue continuing education on industry products and processes. Others market themselves as thought leaders and publish white papers on various topics.

Further, many mutual fund wholesalers now have either Chartered Financial Analyst (CFA) designations or the Certified Investment Manager Association (CIMA) designation. Scott Couto, Fidelity Financial Advisor Solutions’ President says the number of wholesalers at Fidelity with these designations could be as high as 40%, and this factors into the company’s hiring decisions.3

It is also not uncommon for wholesalers to possess increased formal financial education including a Master’s degree in Finance or an MBA in Finance.


U.S. News and World Report includes ‘Wholesaler, Financial Services’ in its list of Top 10 Most Overpaid jobs.4 A reported median salary of $109,000, relatively low job stress and minimal societal benefit were reasons this occupation made the list. Back in 2004, the U.S. Department of Labor pegged the figure at $200,000+.5

This paints an unfair picture because anyone who has endured a sales role in their financial career options understands that these jobs are anything but low stress, especially early on in a professional career. While it may be true that once you’ve built up a sizeable ‘book’ of business, the income is high and the stress levels are lower, that’s the same in almost any financial job as you move up the ladder.

One reason this occupation is under scrutiny is that advisors aren’t incentivized, or required, to reveal their relationship with wholesalers. The robust compensation enjoyed by wholesalers is actually paid out of the fees embedded in the underlying mutual funds. The more wholesalers a mutual fund supports, the higher the total expense ratio of the fund.

One reason this occupation is under scrutiny is that advisors aren’t incentivized, or required, to reveal their relationship with wholesalers.

Actively managed mutual funds, on average charge roughly 1% per year but some fund fees and costs may approach 5% when you include loads.6  In fact, through revenue sharing agreements, the wholesaler and the fund they represent actually pay the advisor a commission to buy their fund. So a financial advisor gets a commission when they sell the fund to the client from the fund itself plus continue to receive their usual wrap fee from the client itself. This is the conflict of interest inherent in many aspects of the financial industry.

Trends for the Wholesaler

Wholesalers are traditionally considered external sales, meaning they go out and knock on managers doors, extoling the virtues of their company’s funds. The Department of Labor’s new fiduciary rules just made this more difficult as classic ‘get to know your client’ sessions are increasingly scrutinized. So mutual fund companies are increasingly staffing their salespeople internally.

This is more of the call center model where wholesalers are in a cubicle, providing on-demand concierge services.

An Ignites’ report revealed that mutual fund companies planned to expand the number of internal salespeople by 6.6% versus just 2.8% for external wholesalers.7 Internal salespeople are cheaper to staff (less travel and entertainment related expenses, etc.) and now bring less liability amidst the fiduciary tightening.

The reform movement against financial services industry shows no signs of letting up. This is evident in increased regulations as well as fee and compensation changes. With the seismic shift towards the exchange traded fund products, there should be opportunities for wholesalers to now represent ETF companies such as State Street Global Advisors, BlackRock and Invesco.

Vanguard is an interesting example of a company that holds a dominant position in both mutual funds and ETFs so that might be an attractive company to pursue for aspiring wholesalers.

While a backlash against mutual fund fees could slow the growth of the wholesaler profession, we certainly wouldn’t count out this field. As long as more complex investment products come to market representing the latest strategies (market neutral, risk parity, low volatility, etc.) there will remain the necessity for competent professionals to educate money managers who are trying to build a client base, not analyzing prospectuses.



Mutual Fund Wholesalers
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Mutual Fund Wholesalers
Similar to an investment consultant offering advice to pension funds, foundations and endowments, mutual fund wholesalers offer expertise on particular products to financial advisors and money managers.
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