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Fund Wholesalers: 2 Critical Steps to Crank Up your Portfolio Design Game

This is the third in a series of thought leadership articles that will explore the issues around how Wholesalers can gain more traction with advisors, and how they can bridge the credibility gap.

In this article, we’ll look at how to level-up your portfolio design game. Make sure to check out the other articles in this series:

Solve the biggest challenges facing wholesalers today

Use technology to build deeper advisor relationships case study

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The days of wholesalers relying on wining, dining and product pitches to influence advisors' portfolio decisions are over. Top-producing advisors, who have already graduated to focusing on providing their own clients with high-quality advice rather than old-school relationship selling, no longer have the time or any interest in meeting with wholesalers who persist in those types of approaches.

And that is true now more than ever. In volatile times like these, when investors are most anxious and most likely to seek reassurance about the performance of their portfolios and their financial futures, advisors are looking to provide even more support and deliver even better results. Especially if fee transparency causes clients to question the value they are receiving from their advisors.

Advisors want help addressing those issues. They want access to those wholesaler-partners who can give them the tools to calm fears, assuage doubt and bolster gains. What they don't need is another steak dinner or a golf shirt.

What is the wholesaler response?

This new set of advisor needs, shaped by customers' heightened expectations, leaves wholesalers searching for a new approach to their role. How can they grow beyond the product pitch to provide the answers advisors are looking for?

One foundation of the new wholesaler paradigm will be built on providing valuable insights related to personalized fund analysis and portfolio construction.

Fund comparisons

In the past year we have seen a greater demand from advisors for assistance in doing fund analysis and comparisons, driven by compliance regulations that make advisors responsible for doing their due diligence on the products that make up the portfolios they recommend.

Compliance drives advisor need for wholesaler help

In Canada there are new regulations regarding the need to Know Your Client (KYC). Know Your Product (KYP) standards are on their way. In the US the regulations are framed around suitability. These regulations bring with them a renewed focus on better understanding the investment products an advisor includes in a client portfolio.

In both countries, advisors are charged with answering two critical questions:

  • How is the product suitable for the client?
  • What are the intricacies of the product in terms of considerations such as the manager's strategy, what they invest in and the riskiness of the product?

So, in addition to uncovering client needs, advisors need to find the product information that proves a particular fund is the best option for meeting those needs and demonstrates their compliance. As time goes on the trend is towards advisors being tasked with more and more work that needs to be done on product due diligence.

It can be a difficult and onerous process. It requires an analysis and side-by-side comparison of the metrics of each product and its competitors to ensure the advisor is making the best choices for his or her clients. And, there's significant compliance risk if this analysis is not done or not done well.

Advisors are looking for help.

The wholesaler role in Portfolio construction

The other cornerstone need for advisors is portfolio construction expertise. Where a fund analysis or comparison looks at the different features and metrics of the funds themselves, portfolio construction is more complex. It not only takes into consideration the individual elements of the portfolio (like funds) but also how they interact with each to achieve client goals.

In portfolio construction the old saw that the whole is greater than the sum of the parts is certainly true. The assets within a portfolio should work together to reduce the risks presented by any one of them which is especially important in times of high market volatility like these.

Performing this type of analysis is not easy for every advisor. Many are looking to fund companies, dealers and wholesalers for assistance.

A new wholesaler opportunity--and a new challenge

The challenge for wholesalers is that stepping up to provide these sought-after services for advisors often requires a new way of thinking, new expertise and new tools.

Historically wholesalers were great at relationship management but portfolio design expertise was not always a strength. They were not necessarily comfortable with or experienced at fund comparison or portfolio construction.

And that made it hard for wholesalers to provide the answers advisors were looking for from a business partner.

That dynamic has been changing as we see more and more wholesalers with CFAs and other investment management designations. But even with the knowledge and expertise, most wholesalers still lack the tools they need to effectively support the advisors they work with.

Leverage technology to up your portfolio design game

For many wholesalers, transforming into this kind of business consultant is best achieved by embracing the benefits of the right technology to enhance the wholesaler skillset. The right software solution can enable wholesalers, even those less experienced at portfolio design, to easily and effectively conduct fund comparisons and portfolio analysis for the advisors they work with. In effect, the modern wholesaler can provide this badly needed service by leaning on the expertise that went into developing the portfolio analysis solution, essentially, providing wholesalers with a virtual analytics assistant.

This new mindset and new expertise can be a game-changer. Coupled with a wholesaler's existing strengths, the ability to efficiently provide fund comparison and portfolio design services will transform a wholesaler-advisor relationship. Offering advisors the opportunity to both address compliance headaches and increase investor satisfaction will make the tech-enabled modern wholesaler an in-demand resource. For many this new approach will turn the tables on a difficult dynamic. Instead of chasing reluctant advisors just to try and book a meeting, wholesalers who can provide this value-added expertise will be highly sought after--the partner advisors really need.

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