5 Ways Wholesalers Can Help Build Your Practice (and Your Career)

5 Ways Wholesalers Can Help Build Your Practice (and Your Career)

Written by: Mark Peterson

It’s no surprise wholesalers are important resources for your firm. And their role in your success can extend far beyond their ability to serve as effective product vendors. During my career, I’ve learned wholesalers can be one of your most vital sources of information, guidance, and professional support. The key is identifying those wholesalers who are dedicated to helping you thrive. Here are 5 surprising ways your wholesalers can help build your practice and your career:

1. Wholesalers can help expand your network

Like salespeople in any business, a good wholesaler knows how to build a great network. They meet with advisors every day, work with all the broker-dealers, and talk to (or have worked with) other wholesalers—competitors or otherwise. Better yet, most are more than willing to provide introductions that can offer great value to your practice. Whether your goal is to partner with other specialists (CPAs, estate planners, life insurance specialists), other peer advisors, or simply start new and meaningful conversations, your wholesaler can pave the way.

2. Wholesalers can offer product expertise

Sure, they know the specifics of their own products, but that’s just the tip of the iceberg. Part of a good wholesaler’s expertise is to stay on top of what’s happening across the industry. Even though fixed-income products are top of mind, don’t hesitate to ask for recommendations for a great alternative fund to balance out your portfolio. They will likely know not only what’s new in the market, but also what products are working—or not—for other advisors.

3. Wholesalers can tell you what’s working for your peers

Earlier in my career, when I worked as a wholesaler, my goal was to walk through every advisor’s door with a basket of ideas. New marketing tools. Emerging practice management techniques. Advisor success stories for everything from getting referrals, to deploying new technologies, to marketing a new product. Wholesalers spend all day, every day, talking to advisors like you, so they hear the good, the bad, and the ugly. And because their goal is to help you succeed, they’re usually happy to share their insights.

4. Wholesalers can help your staff be more effective

A good wholesaler should be willing to come on-site to help train your staff, answer questions about product suitability, and show you how to leverage your “closet” of offerings to better serve your clients. They can also ensure your product materials are up to date, verify that only currently available products are being represented, and that you’re providing the latest version of each prospectus and collateral materials to your clients. As a bonus, your wholesaler is often chock full of real-world tips to help your staff be more efficient across the board.

5. Wholesalers can be your broker-dealer matchmaker

If you’re like most advisors, the time will come when you want or need to switch broker-dealers. Whether that change comes about because the BD is closing their doors, stopped carrying preferred products, or you’ve decided it’s simply time to move on, a wholesaler can serve as a matchmaker to aid your search and help you find an ideal fit. Of course, just like people, every BD has strengths and weaknesses. That’s why when advisors ask my advice, my response is always the same: “Tell me what characteristics help you thrive – and also what shortcomings you’re willing to put up with – and I’ll point you in the right direction.”

It’s been awhile since I’ve been a wholesaler, but I still get a call or an email from an advisor at least once a day asking me for advice. I’m happy to help. In fact, after nearly 30 years in the business—including 15 years as a wholesaler and another decade managing wholesaler teams—helping advisors has been one of my key priorities, and I’ve witnessed first-hand the fruits of strong advisor/wholesaler relationships.

In my early days in the business, I met with hundreds of advisors across the country. I quickly realized they all faced many of the same challenges, and many of the advisors I spoke with told me they often felt extremely isolated. My solution was to set up a series of lunches to get local advisors face to face to share their issues, brainstorm solutions, and simply connect. Every time I visited a particular city, I would arrange a lunch with a small group of advisors, and I’d ask them to bring someone who had never joined the group before. The response was fantastic. Soon advisors were calling me to ask when the next lunch was scheduled, and what I used to view as “sales calls” became think tank forums. I was thrilled to learn that a group of advisors who attended these lunches over a decade ago went on to start a study group together and, years later, it’s still going strong.

Of course, every relationship is a two-way street. Your wholesaler’s willingness to help isn’t completely altruistic. But every salesperson knows that relationships are everything. Most sales decisions are bound to default to the vendor with the strongest relationship – and nearly always, that is the wholesaler who has provided not just a great product, but a heck of a lot of additional value along the way.

Mark Petersen has over 25 years of experience leading distribution and sales efforts in the financial services industry. His background includes managing retail and institutional securities sales as well as national accounts, and he has forged strong relationships with broker/dealers and financial advisors throughout his career. Currently Executive Vice President at GWG Holdings, Inc., Mr. Petersen is also a registered representative of Emerson Equity. His previous roles include co-president of Behringer Securities LP and executive sales and marketing positions with CNL Fund Management, Franklin Square Capital Partners, and Madison Harbor Capital. He holds an MBA in finance from Baylor University and a B.S. in business administration from the University of Texas at Arlington.
GWG Holdings, Inc.
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Building a Better Index With Strategic Beta

Building a Better Index With Strategic Beta

Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF at J.P. Morgan Asset Management

With the global economy warming up, but political uncertainty remaining a constant, it’s more important than ever for investors to position their global portfolios to navigate long-term market volatility. That’s where the power of diversification comes in, says Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies at J.P. Morgan Asset Management and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF (JPIN).

Not all diversified portfolios are alike  

In their search for diversification, many investors turn to passive index ETFs, which track a market cap-weighted index. But these funds aren’t always the most effective way to steer a steady course through volatile markets—and there are two key reasons why.

First, traditional market cap-weighted indices are actually less diversified than investors may think. For example, in the S&P 500, the top 10% of stocks account for half the volatility of the index. Within sectors, while you might assume that sector risk is distributed across the ten major sectors fairly evenly, it is a surprise to many that at any point in time, one sector can be as high as 50% of the risk.

Second, cap-weighted indices come with some inherent weaknesses, including exposure to unrewarded risk concentrations and overvalued securities. So, while these indices provide investors with exposure to the equity risk premium and long-term capital growth, as is the case with any other investment, investors can also experience painful downturns, which increase volatility and reduce long-term performance. For investors seeking equity exposure with broader diversification—and potentially lower volatility—strategic beta indices may be better positioned to deliver the goods.

How do we define strategic beta?

Strategic beta refers to a growing group of indices and the investment products that track them. Most of these indices ultimately aim to enhance returns or reduce risk relative to a traditional market cap-weighted benchmark.

Building on decades of proven research and insights, J.P. Morgan’s strategic beta ETFs track diversified factor indices designed to capture most of the market upside, while providing less volatility in down markets compared to a market cap-weighted index. Rather than constructing an index based on market capitalization—with the largest regions, sectors and companies representing the largest portion of the index—our strategic beta indices aim to allocate based on maximizing diversification along every dimension—sectors, regions and factors. The index therefore seeks to improve risk-adjusted returns by tackling the overexposure to risk concentrations and overvalued securities that come as part of the package with traditional passive index investing.

So, how do you build a better index?

As one of just a few ETF providers that combine alternatively-weighted and factor-oriented indices, our disciplined index methodology is designed to target better risk-adjusted returns through a two-step process.

First, we seek to maximize diversification across the risk dimension. This essentially means that we look to ensure risk is more evenly spread across regions and sectors, which balances the index’s inherent concentrations. As uncontrolled risk concentrations are unlikely to be rewarded over the longer term, we believe investors should strive for maximum diversification when constructing a core equity exposure.

Second, we seek to maximize diversification across the return dimension. Research shows that there are a number of sources of equity returns beyond growth itself. These include risk exposures such as value, size, momentum and quality (or low volatility). When creating a diversified factor index in partnership with FTSE Russell, we seek to build up the constituents with exposure to these factors. We therefore select securities through a bottom-up stock filter, scoring each company based on a combination of these return factors to determine whether it is included in the index. These factors provide access to a broader, more diversifying source of equity returns as they inherently deliver low correlation to one another, providing diversification in the return dimension.

So, whereas traditional passive indices allow market cap to dictate allocations, the diversified factor index seeks to ensure that we minimize concentration to any source of risk—whether it be region, sector or source of return.

How are you currently weighted versus the market cap-weighted index, and how have your under-   and over-weights enhanced risk-return profiles?

Crucially, our weightings don’t reflect specific views on sectors or regions and are instead, by design, the point of maximal diversification. It is important to remember that market cap-weighted indices typically carry a lot of concentration risk—for example, at various points in time, a single sector can explain half the risk of the index when left unmanaged. At the moment, three sectors explain two-thirds of the risk of the FTSE Developed ex-NA Index—these being financials, consumer goods and industrials. In contrast, the FTSE Developed ex-NA Diversified Factor Index—or strategic beta index, which JPMorgan Diversified Return International Equity ETF (JPIN) tracks—is explicitly designed to maintain balance and therefore these sector allocations range from 8% to 12%. In the short term, any concentrated portfolio can of course outperform a more diversified one, if the concentrated bet paid off.

Investing wholly in a single stock may outperform over short-term periods. At other times, it may significantly underperform an index. However, it is well understood that an investor is better off diversifying across lots of stocks for better risk-adjusted long-term gains. The same applies here. From a pure return perspective, if financials, for example, account for half of a cap-weighted index in terms of market cap and have a strong run over the short term, of course, this index would outperform over this period. Over the long run, however, it is fairly uncontroversial to suggest that the more broadly diversified index could achieve better risk-adjusted returns.

Seeking a smoother ride in international equity markets?

For investors targeting enhanced diversification through a core international equity portfolio, JPMorgan Diversified Return International Equity ETF (JPIN) targets lower volatility by tracking an index that more evenly distributes risk, enabling them to get invested—and stay invested.

Learn more about JPIN and J.P. Morgan’s suite of strategic beta ETFs here.

Call 1-844-4JPM-ETF or visit www.jpmorganetfs.com to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.


J.P. Morgan Asset Management
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