By James Langton

(April 11 – 09:30 ET) – A new study from Boston’s Financial Research Corp. on the cost of mutual fund wholesaling observes the emergence of the electronic wholesaler.

FRC’s research finds that some innovative fund companies in the United States are starting to employ e-wholesalers as a way to fight the high cost of external fund wholesaling. While the study doesn’t specifically address Canadian firms, FRC’s joint marketing partner in Canada, Credo Consulting Inc., insists that, “mutual fund distribution strategies in the U.S. offer some of the industry’s best practices for Canadian firms to model.”

FRC finds that, “although face-to-face selling will still be necessary — especially with top producing, ‘corner office’ brokers. But now that an increasing number of brokers and financial planners are getting broadband Internet access, a few trailblazing firms have introduced the e-wholesaler.”

The idea is to maximize wholesalers’ productivity through technology, rather than expensive travel and face-to-face contact. FRC estimates that the total annual cost of an e-wholesaler runs about US$160,000, compared with US$409,000 for a traditional field wholesaler.

It says, “Assuming an e-wholesaler can make 75 ‘virtual visits’ per week vs. 25 personal visits for the field wholesaler, the average cost per visit is just US$44 for the e-wholesaler vs. US$372 for the field wholesaler. In other words, with an e-wholesaler, a firm can potentially realize three times the market penetration at a tenth of the cost.”

The emergence of the e-wholesaler is one of FRC’s findings from a six-month study of intermediary distribution. FRC says its conclusions are based on interviews with senior sales, relationship management and finance executives at 19 investment management firms, interviews with five broker-dealers, and field wholesalers from various firms.