‘Reports on the death of the BDM have been greatly exaggerated’ – 23 June 2015

BDMs still play a major role in helping the market with product discovery in what is a massively inefficient market for information flows

As the part owner of a specialist third party marketing firm, I always ask myself this question… “Why does our business model exist, and what will be the cause of its downfall (other than because of me or indeed, my business partners!)?”  I have reflected on this a great deal. One would expect that product discovery in a digital age would render the role of the professional BDM irrelevant.  That is, why is it that we are able to succeed in a market where information is both abundant and frictionless?  A client needing product X to fill solution Y should easily be able to find this solution without the need of a ‘middleman’, but this is not often the case.  Thus, a critical role played by BDMs is to connect the market place with both new and existing products, assisting in that discovery, and by continuing to provide education around the existing capability; Platinum paid a heavy price by not engaging in the latter activity for many years – they have since changed their approach to stem the outflows.

Having said this, I have been forced to think a little deeper about the continued market acceptance of the BDM role, following comments from experienced market participants that I know, who have opined that BDMs will be extinct within the next ten years; a notion that I disagree with.

First a brief history of BDM’ing

Let’s face it, the world has changed for all of those BDMs who entered the market in the 1990s; saying this makes me feel as old as I look!

Oh those glorious days, where wraps accounts were clamouring (not a typo) to get products onto their menus, where a set of golf balls delivered on a Monday would result in flows on a Tuesday (ok, slight exaggeration; more likely a Wednesday), where there was lack of competition in most asset classes, degrees were a reference to the weather, detailed databases where our bosses could check our activity did not exist, fees were an after thought (unless you were talking with Barry Lambert at Count), regulations were well behind where they should have been, portfolio construction education was in its infancy, research houses played a role, consumers were unsure of what information was right or wrong, but nowhere near as significant as the role they play today, playing golf was every providers’ marketing strategy, and where financial planning was just emerging from the life insurance sales industry.  Because of these factors, we all raised assets under management, but largely because the industry was in start-up phase (‘a rising tide raises all boats’), and not because of any real strategic sales skill (of course, there were exceptions, myself included ;-).

From a BDM (a.k.a. the ‘Brochure Delivery Manager’) point of view, one did not have to be that strategic to get some sales success.  Of course, the great success still went to those firms that had great products and outstanding people (think First State led by Greg Perry; a lot of outstanding sales careers were launched off the back of his investment genius).  Nothing has changed on that front, but a lot of other things have changed that now require BDMs to be better weaponised in order to succeed.

Industry change requires a new approach to sales

Over time, the retail channel (i.e. intermediated market) has become more concentrated, wraps more discerning, dealer groups have become both more expensive and complex to work with, research houses more powerful, consumers are now better informed, advisers having greater constraints (regulation, costs, compliance etc.), competition is more intense, regulation more demanding, fees lower and barriers to entry higher as a result.  The role of the BDM has also changed because of these factors.  From the ‘Brochure Delivery Manager’ in the 1990s, to the ‘Practice Manager’ in the 2000s, to the ‘Portfolio Manager Specialist’ now.  No longer just a good guy/gal with some knowledge on how the industry works but someone with superior intelligence on their subject matter.

It’s because of these dramatic changes that BDMs continue to play an important role

  1. Too much choice allows BDMs to play an important role in helping clients understand those choices,
  2. New products are being launched all the time, which need to be explained to various client segments (think best interests and watch list development),
  3. Clients are time poor and to assume that they are constantly searching for new products is a mistake,
  4. Many underserved client segments do not have the support infrastructure of larger businesses and they appreciate being contacted by providers to hear about good ideas,
  5. Some offers are close ended in nature, offered by highly specialised firms, where only a small number of advisers will participate – knowing where these advisers are and how they will respond to these offers is a key function of any good BDM,
  6. Research houses do not cover all products and a lot of intermediaries do not rely on external research in any event,
  7. The market is now more complex, requiring more skill in connecting customers to ideas, and
  8. Advisers still enjoy going to thought provoking seminars (and not just for CPD points) but to stay on top of the key issues and to network with their peers; organising and planning these events is the domain of the BDM (and not necessarily the marketing department).

Because of these factors, BDMs still have a major role to play in growing sales – digital disruption has not occurred to make product discovery between product providers and customer segments costless (yet).

But in order to succeed today, BDMs need to evolve – the 1990s ain’t coming back  

Provided below are some key knowledge, skill and behavioural attributes that BDMs need to have when operating in a more cut throat environment.  The list is not exhaustive.

Knowledge requirements

  1. Know thy Product.  An in-depth knowledge of the product set that is being sold, the context in which it is being sold, the likely performance characteristics during different phases, the basic features, in-depth knowledge of what the ratings house have said about the product, intimate knowledge of every aspect as laid out in the FSC or AIMA DDQ including governance and service provider information.  Clients should not know more than any BDM on this basic information.
  2. Know thy client.  A thorough understanding of how clients make investment decisions, what their key issues are and what is on their future research agenda.  Also required is a deep understanding of who might influence those investment decisions (internal and external). With that, a BDM can intelligently engage with their clients.  BDMs have to be skilled in client interrogation, gathering facts directly and indirectly to do this well.
  3. Know thy enemy.  A complete knowledge of the competitor set that is far deeper than just basic product features, to knowing the actual team size and experience, ratings (pros and cons), performance over multiple time periods (on a range of measures), key holdings and how they are different, and how you blend (to go from competition to coopetition) etc.  BDMs need to spend more time analysing data, and doing so on a regular basis.  Simple cheat sheets can help here.
  4. Know thy market. An acute understanding of the key portfolio trends that might be changing the investment landscape (e.g. objective based investing, lower for longer, sequencing risk, longevity risk etc.), in addition to being able to converse well on the key economic themes of the day (e.g. Fed hikes, China stock bubble/Aussie housing bubble, Grexit etc.).  BDMs need to spend more time reading and then thinking the big issues through – “how do these issues impact my strategy; what are my clients worried about?” etc.
  5. Know thy industry. Knowledge of how the changing shape of the industry will impact the sales strategy (e.g. the rise of small consultants, FoFA and its impacts, the rise of managed accounts, the dealer as the investment manager, smaller APLs requiring higher ratings, a preference for direct investing over investing in funds, low fees on market beta and high fees on TRUE alpha, high minimum thresholds for wrap approvals, in-house products over external ones, robo advice etc.).  BDMs need to understand where they will win or lose as the industry reshapes (and this is a continual process) and then respond accordingly.


Skill requirements

  1. Sales planning and pipeline development.  BDMs have to think like self-employed business people – they need the discipline to manage their pipeline and to analyse their own financial performance (revenue generated, versus my direct and indirect costs) – what is working what is not etc.  The pipeline is a live document that should be updated in real time, with activities directly (or indirectly) related to increasing sales.  This requires client servicing and prospecting skills to effectively grow the pipeline and to increase the probabilities of activities leading to sales.
  2. Superior communicator.  To explain complex themes and principles more easily, BDMs need to become brilliant communicators; let’s face it, very few PMs pass this test.  So BDMs need to think about… “When I leave the meeting today, I want the client to remember these two key points” and if a BDM, ask yourself… “How is my presentation structured to meet that objective?”
  3. Cross channel marketing skill. The ability to work across different channels, each with different buying characteristics is a critical skill.  Today’s BDMs need to think and act differently, as the retail market becomes more institutional – a side effect may be less BDMs in time (but not extinction).  Thus, the BDM needs to be able to easily navigate between speaking with a dealer CIO, family office IC or a research analyst or at a ‘mum and dad’ seminar – the message needs to change with each audience but never losing site of the critical points.  This is where having the knowledge requirements listed above plays such an important role.
  4. Negotiator.  The ability to complete complex negotiations.  Don’t just come to the sales meeting and say “we will win the business if we drop our fees by x amount, what should we do?”…  Come to the meeting with a recommendation on how to win the business showing the P&L impact and the impact on the existing business of any such deal. Think and act strategically.
  5. Innovate or die.  Raising sales requires a level of innovation.  Innovation can only come from superior market knowledge.  You might find a gap in the market or a different way to package the fund manager skill with this knowledge well before the rest of the market catches on.  This does require the funds management organisation to play ball – e.g. there are still many fund managers that will not provide their skill as SMAs, incorrectly fearing IP leakage.  The horse has already bolted.  And it is changing; Magellan’s recently launched exchange traded managed fund will open a new market for everyone else to follow where it makes sense.


Behavioural requirements

  1. Transparent and open.  Gone are the days where a portfolio manager could sit away and just manage a portfolio.  BDMs have to act as the bridge between the PMs and the clients by demanding full disclosure and accepting nothing less.
  2. Polite persistence.  Don’t take it personally when someone does not return your call.  Most people won’t.  But to give up on one knock back is not the pathway to success.  Try a different route to get to the decision maker, send them articles of interest that you know, get an introduction through someone else you know, invite them to a sponsored event.
  3. Be decent. (I struggle here, so I have been told…).  Put your client at the centre of your world, add value to them even when you may not get a direct benefit – a referral here and there, organising a meeting with someone in the industry that they will benefit from, an invitation to an industry event etc.  Great and trusting relationships are formed this way, and relationships still matter!
  4. Patience.  Because the market is more complex, decision cycles take longer than in the past.  So, be patient!  For an adviser to start using your product, requires enormous effort on their behalf and you are just one of many competing for a valuable slice of their client portfolios – you have to stand out; and standing out requires, great product matched with superior knowledge, skills and behaviours.


I’m bullish on the future for good BDMs

The future for professional sales has never been brighter, but to succeed today, BDMs need to work harder on understanding their clients, industry trends, competitor actions, their role within the market and the market/political environment in general – to do this, they need to devote much more time to research before engaging with customers (except when doing market research that directly involves speaking with customers).  More time on communication skills and less time on just talking.  More time on personal education and less time regurgitating other people’s opinions and more time on doing the right activity with those segments of the market where the products have most likelihood of succeeding.

And whilst I do reminisce about the 1990s (I was never good at golf, so I don’t miss it that much), the current environment is a great one where perseverance and intelligent execution are being rewarded.

Andrew Fairweather, Founding Partner.


“Reports of my death have been greatly exaggerated”

The expression derives from the popular form of a longer statement by the American writer, Mark Twain, which appeared in the New York Journal of 2 June 1897: ‘The report of my death was an exaggeration’. The correction was occasioned by newspaper accounts of Twain’s being ill or dead. At the time, Twain’s cousin James Ross Clemens was seriously ill in London, and appears that some reports confused him with Samuel Langhorne Clemens (Mark Twain). 

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