In the medical world, sales reps come to doctors’ offices to represent a drug or piece of equipment. The financial world has the equivalent these people are called wholesalers. The investment world is a big place and there are a lot of investment companies out there!!! So how do these investment companies get known and get a slice of the public’s money to invest especially when a lot of these investments and strategies can only be sold through a stockbroker or financial advisor? That is where the wholesaler comes in! The wholesaler’s job is to get as much money as possible invested in the company or strategy they represent.
They call on advisors until they get an appointment either to show up to their office or take them out for food. Over the appointment, the wholesaler will often pull out a fact sheet to present to the advisor. The fact sheet is the summary of facts about the investment, depending on the investment it may be for professional use only and not be allowed to be handed to the public. Somewhere in the conversation, the wholesaler will open up into a story about the investment. This is partly because investing has to be rooted in economic rationale but more importantly for the wholesaler because stories sell. Now there are plenty of investments with great stories that may not be as great of an investment. This is where a discerning critical advisor is very important.
Depending on the advisor they may be convinced enough by the wholesaler to start recommending the investment to clients right away or they may open up into an added layer of due diligence. A financial advisor that uses the pitched investments without an extensive layer of added due diligence is likely to be parroting the same story from the wholesaler to clients. Due diligence is the process of determining whether the investment is indeed as good as it looks at first glance since most investments look great at first sight; otherwise, there wouldn’t be someone representing them. As the advisor invests more and more client money into the investments the wholesaler represents, the wholesaler becomes increasingly willing to sponsor different activities. The budget a wholesaler can have may vary greatly depending on what company they represent some tiny investment group or Wisdom Tree Funds. Events sponsored by the wholesaler can include things like a dinner for client appreciation or some other client-focused event.
As with all sales and marketing, there are varying degrees to which people are influenced as a result. Marketing isn’t necessarily bad and does serve a very important function in helping bring more visibility to something in a world where there is an abundance of things to sort through. Financial advisors are no different in that with marketing some may be easily impressionable while others may be called on multiple times a day by wholesalers and not influenced in the slightest. For critical advisors that are not easily influenced seeing all these product pitches may help them in their role giving them a wider net of knowledge and research of what other things are currently out there. However, this relationship is largely unseen by the end client and wholesalers may play a bigger influence on portfolios than people think.
