Can Mutual Fund Wholesaler’s Salaries Be Justified?


One of the biggest problems facing the mutual fund industry’s relationships with its millions of shareholders is justifying fund wholesalers’ salaries.

This is a contentious and sticky issue for a few reasons:

First, mutual fund wholesalers really don’t add anything which directly benefits shareholders.

In theory, they should be reducing overall fund expense ratios by increasing the asset base of mutual funds.

This would then lower the overall expense ratio for all shareholders. That was the original theory and rationale behind allowing 12b-1 fees to be charged in the first place about 30 years ago.

But since then, fund wholesalers have been selling funds, receiving huge salaries, having all of their expenses paid by the fund companies, and(in many cases)receiving commissions based on revenue sharing deals with registered reps.

The problem today is how to justify these huge salaries when they do not directly benefit shareholders.

It’s a dilemma which has not been publicly discussed before and that is surprising due to the abundance of financial journalists and financial media outlets, which are supposedly working to educate investors about the optimum ways to invest.

Yet almost everyone agrees that the best way to increase overall fund returns is to invest in funds with low expenses.  Since that is the case, how can so many funds justify these large salaries without decreasing their expense ratios?

So with that as a brief background, this salary chart (which comes from U.S. Department of Labor statistics and Kassina) show the salaries of various professions, many of which provide specific, tangible societal benefits.


Are the salaries justified?

Since the late 1990s, mutual fund asset growth has declined significantly from the record levels seen during the mid- to late-1990s.  Yet according to Kassina, a mutual fund consulting group, wholesaler compensation has not declined despite the downturn in the industry and the significant layoffs.

Data from Kassina shows external wholesalers typically receive an average annual base salary from $65,000 to $98,000, with an average of $83,000.  Total target compensation can range broadly from $225,000 for an average-performing wholesaler to over $500,000 annually for top performers.

This puts mutual fund wholesalers at the top of the compensation list, based on government and fund industry statistics.

What Benefits Do Wholesalers Provide Shareholders?
Now, the mutual fund industry’s largest funds should justify why, and how much, mutual fund wholesaler salaries benefit their own shareholders.

Ideally, this should be shown using correlations between wholesaler salaries and a specific fund company’s decrease in its total expense ratio over time. If such a correlation exists, it would make a great marketing message and allow some fund marketing exec to differentiate their fund.

This would be a historic revelation.

It also would be especially welcome now since the fund industry is so openly antagonistic and has vehemently lobbied against all issues related to fiduciary responsibility, transparency, fee reduction and any modicum of financial reform.

But this again raises the simple question:  What benefits do fund wholesalers deliver directly to  their fund companies’ individual shareholders to justify their large salaries?

It’s a simple question that deserves a simple answer.

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Chuck Epstein

Chuck Epstein

Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry.

He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial.

He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).


  1. Tequila George
    October 4, 2017 at 3:47 pm — Reply

    The real question is… How do we justify the absurdly low wages of laborers and the huge disparity in earnings of all employed?

    If this author’s pet peeve happens to be a person that earns a good living for having fun, then, please, join in that career & abandon your jealousy.

    If you truly are concerned about justifying earnings, investigate the basis of all corporate executive compensation, that might prove to be a whole lot more fruitful investigation.

    • Chuck Epstein
      October 5, 2017 at 2:46 pm — Reply

      Since its inception, this site has covered wage disparities and stagnant real income that began in the Reagan Administration. The role of mutual fund wholesalers is that are among the most highly paid people in the fund industry, but they do not contribute one cent to the net return of investors. There are many reasons wages are so low, such as productivity has not kept pace with wages; Republicans consistently vote against a higher minimum wage; there is rampant job security and more automation; the decline in union memberships; changes in demographics; outsourcing; and a corporate mentality which diverts investment into stock buybacks and executive compensation rather than expanding the workforce.

  2. Justin Terman
    February 24, 2018 at 6:52 pm — Reply


    Thank you for bringing attention to those of us leaving our families every week to help distribution for mutual companies both big and small. You raise a very important question, what value do consultants offer? I don’t have enough characters available to help you understand the value we bring to the table. The piece I will address is cost. There are many great funds available in the marketplace that we may never know about because they lack a distribution team. The cost to run those funds can be very high due to size and trading costs.

    One of many value-adds a consultant brings to a fund is increasing the AUM. Many funds are able to lower their management expense as the AUM increases. If you’re not a Blackrock, Capital Group, Janus Henderson, etc. it’s very hard to grow assets without a distribution team. The marketing budget for those companies is more than he annual revenue for smaller mutual fund companies.

    Not only are we increasing AUM, we are helping financial advisors educate their clients. We free up time for advisors to spend more time planning with their clients. You cannot put a price tag on the value of a great consultant.

    If you’d like t join our industry I have a couple slots open in the West. Want to give it a shot? It’s not that easy.

    Justin Terman
    VP, Sales (over paid wholesaler)

    • Chuck Epstein
      February 25, 2018 at 2:39 am — Reply


      Thanks for your note.

      First, there are millions of people who leave their families every week as salespeople. They are paid for their services, so most people do not consider it a hardship. I’ve heard this complaint before and for some reason wholesalers think that being a travelling salesperson is too painful. That is a complaint that is very lame. You get paid a lot and have all your expenses reimbursed 100%.

      Second, you note that mutual fund sales people are “consultants,” not salespeople. I disagree. While many wholesalers have the knowledge and experience to talk about various investment and estate planning strategies and products sold to individual investors, most do not, nor is that what they are being paid to do.

      I worked at Principal and travelled with wholesalers for a few weeks. During that time I never saw one act as a “consultant.” They may have talked generally about the markets, but they centered their business-to-business presentations specifically about Principal’s funds and how one may have outperformed for the quarter or year than a competing fund. Getting appointments was hard since the funds were not exceptional and a lot of that time was spent trying to build rapport over meals. and coffee. On one trip, the wholesaler said he had two to three breakfasts and lunches a day, just to get an appointment with a broker.

      Also, we all know larger AUMs do not automatically convert to lower expenses, which benefit investors. It is not a absolute causal relationship. If it was, the fund industry would have made better gains against ETFs. Fund expenses are also high because wholesalers rerquire an army of internal wholesalers to schedulte their appointments. Plus. wholsalers get all of their expenses 100% reimbursed from the fund company which also keeps expenses high. Needelss to saly, wholeslers do not add anything to an investor’s net returns since their advice filters through a broker and all of their expenses are paid for by fud shareholders.

      In short, based on being in and covering the investment industry for 30-plus years and seeing the work of wholesalers and their expensive support staff first-hand at Principal and Russell, mutual fund wholesalers are a rudiment of the insurance industry. If it were not for mutual fund industry inertia and lackluster fiduciary supervision at 401(k) plans, wholeslers should go the same way as blacksmiths.

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