Institutional Sales is Dead, Long Live Institutional Sales


The following is a guest article by Peter Bentley, Founder and Managing Partner of London-based KentMarlow Solutions, a transformation advisory business that works with financial services businesses.

Sales is changing… Actually, it has changed and as the last bastion of resistance, true to form, capital markets firms are going through the motions and resisting the inevitable. Despite the resistance, however, change could actually make institutional sales become more sophisticated and impactful.

So far, most commentators have focused on MiFID II, research pricing and its evolution into what is now a procurement process. Sales, it has been assumed, will either become more valuable (if it is a specialist) or redundant (if it is generalist).

If, as Quinlan & Associates suggests, research wallets are to go down 30% by 2020, with headcount in research following suit, surely the poor souls that “sell” the stuff are in for a rough ride?

But change brings opportunity: very few have taken a look at what a sales role in the future might look like and how it can drive growth…

 What was institutional sales? Best mates, bums-on-seats and a bit of data…

The evolution of sales started where all sales starts – a person with enough personality to build relationships. The pinnacle of this was the ability to be ‘best mates’ with clients and ‘godfather to their children.’

Post the financial crisis, however, the crush on entertainment spend and then the review of every interaction meant that sales had to add some value. That could be to draw attention (and summarize) a piece of research, provide a trading idea or, simply provide access to an analyst, corporate or company event.

These interactions would presumably lead to commission payments or, because sales people do not like to ask for real money, a ‘vote’.  A ‘vote’ would mean money, or, if not, at least accreditation in an Extel or II survey box.

A bank’s growth strategy often relied on sales heads so the solution became hiring more salespeople, ‘bums-on-seats’. Too often growth was a process of quantifying a market position, an upside opportunity, followed by a round of significant hiring in order to achieve that target.

Needless to say, success was rare. Everyone targeted being number 5 and few ever considered the role that the franchise played in achieving said position. Even your ‘best mate’ could only justify paying a small ticket versus the $5m they used to pay you at Morgan Stanley.

However, sales strategy and, in turn, client strategy did improve. Some banks were better at it than others, but as the bums-on-seats grew, data became important, first to manage sales staff and then to target opportunity.

Firms such as UBS, CLSA and Morgan Stanley became experts in client strategy, tracking engagement and sales benefited from that process.  However, while data became part of the process, it was never truly leveraged. We have worked with a number of sell-side data providers (McLagan, Extel / II, Coalition etc), the combination of all them (if you could afford it) plus the wealth of internally generated data, is truly compelling.

No firm ever really achieved the zeitgeist of data intelligence or was able to translate it into action. In hindsight, this was a missed opportunity when you consider understanding value and engagement is central to what the regulator is trying to drive

Sales outside of the capital markets bubble – digital, mind share and cookies…

Broadly, the objective of sales is client or revenue acquisition and pay is on the upside; high salaries are counter-intuitive to the core objective of the role. Secondly, votes do not exist outside of broking – the focus is money, whether that be generated through selling phones, recruitment or houses.

However, most importantly sales are part of a commercial process. Sales, with the exception of capital markets, is multi-dimensional: share of mind, brand, marketing and environmental awareness. Pricing and commercial structures are flexible and gratification can be had in person or online. Google, Facebook and other data aggregators injected sales with rocket fuel by harnessing data, online habits and ‘cookies’; adverts appear on every website you visit until you finally click the buy button.  In summary: sales in the real world is slick, smart and sophisticated.

The future of institutional sales – special forces, commercial officers and bionic sales people…

Sales in capital markets does add value. The complexity of markets, the need to filter information and the sheer scale of data available means that knowledge is not always democratic. The challenge is how to add value that is customized to each client, efficiently and effectively.

The tools are all there, but capital markets firms need to embrace the changes that would make sales more sophisticated.  So, let us imagine the following:

Firstly, data transparency must fully happen. Interactions are captured now but also clarity on value should be added.  The bulk of existing sales workflow: voicemail, emails, and voice blasts are all push-oriented and should now be discounted to zero value.

Historically CRM systems captured the interaction, but the text field was invariably used for some form of mutual back-patting.  We now know what clients like and what they value: analysts, corporate access, liquidity, balance sheet and so on because they tell you so with a cheque rather than a salesperson writing it in a text box. We also now know how clients like to consume: some just want to read, some want to chat and there are shades of grey in-between.

If we couple this with a clear view of how you are going to be paid, focus list construction can move beyond just the concept of a dollar upside figure and a binary decision of throwing everything at the client or shutting them off. Focus lists cease to become Platinum, Silver, mid-markets or tail strategies. Instead the focus is how clients consume and then the dollar potential. Importantly, through this process you get to a client profitability model that actually makes sense.  Fidelity could become a profitable account in the future, even if their payments decline.

Secondly, client strategy becomes core to the client engagement effort. A salesperson becomes one dimension of that process — maybe the most important part if that is what the client values. Importantly, sales are also supported by content distribution strategies and marketing campaigns (both analogue and digital).

All clients can be channeled appropriately: trading, digital, readership, emails, access to Bloomberg, plus brand awareness efforts all become vital to driving engagement.

Thirdly, we see the rise of the Commercial Officer, a role more prevalent outside of capital markets.  Historically the head of sales has been the senior revenue producer, or manager of the revenue producers. In the future sales is now a lever. Sales may be the special forces and digital becomes the general infantry.

A commercial officer, to stretch the analogy, looks at the battlefield and marshals different forces appropriately (including special forces). They also consider what the field might look like in 3 years’ time and how to prepare.

Sales have 12-month targets and they get paid on performance. Sales do not disappear, they actually get more help and growth strategies are not solely reliant on bums-on-seats. Profitability might actually be achieved.

Multi-dimensioned, data empowered salespeople can make a difference.  There will be less of them but there will less of everyone and those that survive will be those that adapt and pull the levers appropriately.

Finally, salespeople could become bionic. The Googlization of capital markets is inevitable.  Consider a day when all the data is captured, consumption preferences understood, interests logged, and relevant news and tweets parsed. This already exists and is owned by the likes of RenTech, DE Shaw, Two Sigma and BlackRock.

Salespeople could be augmented with the same insights and their workflow built for them. Imagine if your digital assistant could alert you that: “this is happening in the market, this client did this before, read this, clicked on this site” and then it advises you to “phone this person and talk to them about this”.

The whole process could make sales incredibly effective, focused, with all mediums of engagement designed to increase the chances of relevance and therefore exponentially increase the chances of being paid. We know this is possible because we are working on it now, the technology is available, accessible and cheap. The only barrier is having the imagination and commitment to embrace the change.


About Author

Peter Bentley is Founder and Managing Partner at KentMarlow Solutions a transformation advisory business that works with Financial Services firms focused on sales effectiveness: leveraging data, driving client strategy and considering different paths of client engagement to drive performance. We also work with partners to build the sales people of the future. Peter has worked within the Equities industry with senior management at nearly 100 Equity businesses as Partner of the Performance Practice at McLagan. He subsequently worked at Macquarie where he was a Managing Director and was responsible for building the first mover MiFID friendly digital research distribution business “Macquarie Dimension”.

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