OppenheimerFunds field wholesalers started the year with a 30% base-pay cut on mutual funds sold through traditional non-qualified accounts and defined contribution plans, including individual retirement accounts, proprietary 401(k) plans and SEP accounts. The pay cuts were part of broader management strategies aimed at encouraging wholesalers to spend more time with larger brokers and advisors who write bigger tickets and divert smaller customers to a growing bank of e-wholesalers.
Senior officials started contacting wholesalers a few days before an annual meeting in mid-January to let them know their base commissions had fallen to six basis points in 2006 from nine last year. OppenheimerFunds National Sales Director Richard Knott, who reportedly softened the blow by sending the wholesalers video iPods valued at $400, did not return calls. James Ruff, president, deferred calls to spokeswoman Jessica Greaney, who declined to comment.
A wholesaler who generated $270,000 of commissions on $300 million of sales in 2005 would earn $180,000 for the same volume of business in 2006. Wholesalers have an opportunity to match last year’s compensation scheme by meeting new production goals. If a wholesaler gets enough business to generate $500,000 in commissions, OppenheimerFunds will add 1 basis point to his compensation. For more than $1 million the wholesalers get another 2 bp, and for $2.5 million or more they get three.
Marketing executives will push wholesalers to prospect for larger clients by gradually moving their smaller accounts to a battery of e-wholesalers. At the same time OppenheimerFunds will add at least one e-wholesaler to each of its six sales districts throughout the year, effectively creating a new infrastructure of lower-compensated marketers to handle smaller clients.