ANALYTICS IN ACTION WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE WHITEPAPER

ANALYTICS IN ACTION WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE WHITEPAPER

ANALYTICS IN ACTION WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE THE DISTRIBUTION IMPERATIVE Asset management firms have enjoyed robust growth and earnings over the past 25 years, benefiting from a steady inflow of assets into mutual funds. However, asset outflows since 2009 would suggest that future success will hinge much more on taking share from the competition. In the past, a unique or well-performing fund product would create sufficient differentiation to attract incremental assets. Today s saturated market for new funds makes it more difficult for firms to create and sustain productbased differentiation. Faced with this more challenging environment, firms are realizing the imperative to achieve distribution excellence in the advice channel. WHOLESALER AS WARRIOR Today s mutual fund wholesaler is a besieged gladiator, fighting to gain favorable attention from advisors. Wholesalers are challenged on three fronts: 1. Greater ethical and fiscal oversight has reined in the practice of lavishing advisors with expensive dinners, golf outings, wines and other gifts. Such interactions now receive a higher level of scrutiny from internal compliance personnel, regulators and the media; What is Predictive Analytics? Predictive Analytics encompasses statistical techniques to analyze historical data and make predictions about future events. Consumer companies like Amazon and Netflix have popularized predictive analytics by offering targeted product recommendations on books and movies based on historical shopping patterns. Increasingly, many B2B companies are applying these techniques to boost sales and marketing productivity. The insight is that the explosive growth of data about companies and purchasing decision makers contains hidden but invaluable intelligence for frontline sales teams. In any business with high distribution channel costs, predictive sales intelligence enables managers to focus scarce sales and marketing resources on the most attractive market opportunities. 2. Financial advisors can now educate themselves on a particular fund or fund family instantly just by tapping into readily available online information. The wholesaler is no longer a privileged source for access or insight and must find new ways to add value to the sales process; 3. Optimal advisor coverage has become a hot-button issue. With territories often encompassing more than a thousand advisors, wholesalers must now make tough calls on which advisors to cover and how often to engage with each one. A compromised coverage strategy often results in significantly lower sales results for the entire wholesaling team. ANALYTICS IN ACTION: WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE / 1

ACHIEVING DISTRIBUTION EXCELLENCE WITH PREDICTIVE SALES INTELLIGENCE Proven weapons do exist to improve wholesaler productivity. Innovative asset management firms have realized that they can do far more to help their wholesaling teams make profitable decisions about how to spend their time and energy on a daily basis. These progressive firms are tapping the power of data and predictive sales intelligence to quantify advisor sales potential and reveal actionable insights about advisor behavior and needs. Consider the dramatic productivity gains just from applying a predictive, data-driven model to the issue of coverage: How often to visit each advisor (if at all) each quarter. A traditional approach might rely on a simple metric Previous Three Months of Gross Sales to rank advisors and then bucket them into deciles. Based on this information, wholesalers would generally be directed to cover the highest potential advisor deciles first, as represented by the leftmost columns in Figure 1. Not surprisingly, advisors in the top decile typically generate $27,000 in incremental sales per meeting, compared to the $10,000 average. While this basic approach works, a predictive model to rank advisors performs significantly better: the advisors in the top decile would generate $45,000 in incremental gross sales per meeting; a sizable 68% improvement. The ability to laser-focus on the most attractive advisors is critical since wholesalers can cover only cover a fraction of advisors in their territories. Figure 2 compares total sales generated by wholesalers in a mid-sized firm with 20,000 active advisors and the capacity to call or meet only 20% of the advisors in a given month. The predictive model would generate total monthly gross sales of $140 million; a 49% improvement over gross sales of $95 million achieved using the standard approach. Figure 1: The predictive model to rank advisors outperforms the standard approach INCREMENTAL SALES PER MEETING Thousands of Dollars $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Figure 2: At 20% coverage, the predictive model increases total sales by 49% TOTAL MONTHLY GROSS SALES AT 20% COVERAGE Millions of Dollars 49% $95 Applying Predictive Model Standard Approach Model generates 68% improvement 10% 20% 30% 40% 100% ADVISOR DECILE $140 / / Average Optimizing advisor coverage represents just the tip of the iceberg. Firms can also provide wholesalers with deeper, more relevant insights into advisor behavior, attitudes and purchasing patterns that add up to the winning edge. Standard Approach Applying Predictive Model 2 / ANALYTICS IN ACTION: WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE

Imagine gaining insight into the following types of segmentations: WHAT is the profile of your most valuable advisors? WHICH advisors should be selling significantly more of your funds? WHICH advisors will be most interested in your newest fund? WHEN are advisors much more likely to be receptive to engaging with you? WHY are some advisors not selling a specific fund, even though their sales history suggests they should? WHICH advisors are information-intensive and enthusiastic about learning more on the latest fund details? (e.g., new fund manager, investment thesis, performance overview) WHICH advisors are most likely to be influenced by peer results? (i.e., how they compare to other advisors in their office or firm) Armed with robust segmentation intelligence, wholesalers are much more persuasive in every advisor meeting and interaction. They are more likely to secure meetings with the most coveted advisors and convert more appointments into higher incremental sales. As a final benefit, data and predictive sales intelligence enable managers to assess each wholesaler s performance relative to his or her peer group. For example, a Regional Sales Manager might note that an otherwise successful wholesaler is struggling to sell the firm s newest funds. As opposed to providing generic feedback, the Manager would steer the wholesaler to specific advisors who would be most receptive to these funds. Data-driven coaching also creates broader institutional knowledge, enabling sales leadership to identify and disseminate winning advisor outreach strategies and best practices across the entire organization. Best of all, your firm already possesses the raw materials for sales intelligence: Data. Firms can readily tap into a goldmine of internal data about their advisors. For example, sales and redemption transaction histories provide insight into advisor behavior relative to overall market trends, specific asset classes, and peer advisors. Website click-stream and marketing-response data can also reveal an advisor s underlying fund preferences and research objectives. By correlating external data such as fund performance and advisor profiles (e.g., local office demographics, schools attended, professional associations) to advisor selling patterns, wholesalers can predict which messages will resonate most forcefully during the next meeting. Informed wholesalers sound more confident, credible and compelling. At 20% coverage, the predictive prioritization model would generate total monthly gross sales of $140 million, a 49% improvement over the standard approach. ANALYTICS IN ACTION: WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE / 3

FOUR STEPS TO DISTRIBUTION EXCELLENCE: Your firm is most likely already on the journey to achieve distribution excellence. Many of the required data sources are available. Your wholesaling managers are already practicing some type of coverage prioritization. The four steps below will accelerate your journey and develop and ongoing, data-driven capability to boost wholesaler productivity. 1) ASSESS YOUR TEAM S CURRENT PRACTICE AND NEEDS All wholesalers prioritize their activity to some extent, and sales leaders are becoming increasingly active in setting and enforcing these prioritizations. A targeted diagnostic is the best place to start covering the following questions: How sophisticated is your process to rank advisors? (e.g., advisor quartiles based on simple metrics like assets and gross sales) Do you determine a specific coverage frequency for each advisor? Do you track how closely the wholesalers are executing on the overall coverage plan? Do you provide tactical direction to the wholesalers on what to discuss in each advisor meeting or interaction? What three enhancements to the CRM system are wholesalers requesting? What five pieces of information should wholesalers enter into the CRM system after every advisor interaction? 2) CONDUCT A DATA AUDIT Achieving distribution excellence begins with the recognition that data is a mission-critical business asset. To fully understand its value, your team should start with an audit of internal data repositories (e.g., transactional data, CRM data, website data) and external data sources (e.g., fund performance, advisor profiles). It is important to prioritize these sources by ease of access and perceived value to distribution analytics. Complete the audit by examining the data quality for each source (e.g., breadth of useful fields, linking to other data sources and field completion rates). It is tempting to integrate any and all data sources from the get-go. However, focusing initially on a few, priority sources such as advisor-level transaction histories and sales coverage data will generate meaningful results, while minimizing execution risk. With a prioritized and validated set of data sources, confirm whether the data is already integrated within an existing data warehouse and available for analytics. 3) BUILD AN ANALYTICS FOUNDATION (Figure 3) Developing the advisor s profile and current value is the foundation of predictive analytics. This profile should incorporate a quantitative view (e.g., assets under management, net purchases last 30/60/90 days and products sold), as well as qualitative elements (e.g., advisor tenure, website downloads, firm profile and social media positioning). With this foundation in place, consider straightforward, strategic segmentations of the advisor base. These analytic cuts typically include: Estimates of an active advisor s current and long-term value to your firm The attrition or redemption risk of current advisors. The acquisition likelihood of advisor prospects These segmentations should inform strategic planning decisions on where and how to align sales and marketing resources (e.g., service levels for advisors with high current 4 / ANALYTICS IN ACTION: WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE

value and high attrition risk). It is important to validate the analytical output through discussions with field sales and marketing personnel, who will have the most intimate knowledge of advisor nuances. The final step in this analytics progression is implementing an operational solution that makes ongoing recommendations to wholesalers on which advisors to contact, at what frequency, and with what messaging. While choosing a robust analytics solution is important, there are other subtle ingredients to sustained productivity gains: How do you ensure that wholesalers adopt the solution and execute based on analytic recommendations (versus gut feel)? How do managers track wholesaler activity and outcomes to measure execution and provide systemic, data-driven coaching on selling performance? Piloting a predictive sales intelligence solution in select territories carries the dual benefits of answering these questions empirically and validating the business case with quantified results, such as sales lift in the pilot territories. Figure 3: Build an Analytics Foundation IMPLEMENT SALES INTELLIGENCE SOLUTION Deploy operational solution that makes ongoing recommendations to wholesalers on which advisors to contact, at what frequency, and with what messaging SEGMENT ADVISOR BASE Segment advisor base to inform strategic planning decisions on where and how to align sales and marketing resources DEVELOP ADVISOR PROFILE AND CURRENT VALUE Develop advisor profiles incorporating a quantitative view (e.g., assets under management, net purchases last 30/60/90 days and products sold) and qualitative elements (e.g., advisor tenure, website downloads, firm profile and social media positioning) ANALYTICS IN ACTION: WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE / 5

4) TEST, ITERATE AND IMPROVE Data and predictive sales intelligence can deliver immediate benefits, but winning over the long term requires a commitment to testing and continuous iteration. Inevitably you will encounter valuable new, predictive data sources following the initial deployment of the analytics solution, and field teams will also make insightful recommendations that more closely align the analytics with sales and marketing. The path to actionable insights requires an organizational culture of ongoing testing, measurement and improvement. * * * Innovative asset management firms continue to forge a successful path to distribution excellence by integrating predictive sales intelligence solutions into their wholesaling operations. Incorporating data-driven decision-making into retail fund distribution is no longer an option given heightened competitive pressures. For firms that have yet to take the first step, the timing is ideal. The value has been well established by pioneering firms and the initial operating challenges have been overcome. 6 / ANALYTICS IN ACTION: WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE

LATTICE ENGINES is the leader in B2B sales intelligence software enabling Fortune 5000 companies to Sell Smarter and achieve a 6-14% increase in sales within one year of deployment through Intelligent Targeting, Contextual Conversations and Measurable Execution. LATTICE ENGINES 1825 SOUTH GRANT STREET, SUITE 510 SAN MATEO, CA 94402 / 877.460.0010 LATTICE-ENGINES.COM FOLLOW LATTICE ENGINES ON TWITTER: @LATTICE_ENGINES ANALYTICS IN ACTION: WINNING IN ASSET MANAGEMENT DISTRIBUTION WITH PREDICTIVE SALES INTELLIGENCE / 7