Would you want to work in equity sales now? Maybe not. With MiFID II approaching and banks in any case shifting to high-touch/low-touch models of client coverage in which clients are either serviced individually by experienced staff (high touch) or dealt with en-masse with the help of electronic customer care systems (low touch), equity sales isn’t what it was. It seems juniors in the sector, especially, are starting to figure this out.
Headhunters point to an exodus of junior salespeople in recent months. Morgan Stanley is a case in point. After bonuses were paid at the start of 2017, Morgan Stanley is thought to have lost around eight analysts and associates from its equities sales team in London, including Stephen Wilks, an analyst who set up Seneca Learning in March, Andrew Stone who quit for GLG in the same month, and Rauf Khan who went to McKinsey & Co. While banks like J.P. Morgan are rumoured to have cut offers to interns on sales teams this year, headhunters suggest Morgan Stanley kept its team fully staffed with juniors but that 20-somethings there – as at other banks – are realizing that sales jobs aren’t for them: “There’s a lot of uncertainty around MiFID II and people have been fed up with senior staff hoarding the best client accounts,” says one senior equity salesman, speaking on condition of anonymity.
Morgan Stanley declined to comment on its sales juniors. It’s not the only bank which seems to have sales issue. Macquarie Capital Europe is also said to be in the middle of rejigging its equities business after parting company with Dipesh Patel, its sales-focused head of cash equities in Europe who joined from Espirito Santo in December 2014.
Equities headhunters say salespeople’s biggest issue right now is, understandably, MiFID II. The regulations, which are due to come into effect in January 2018, will mean that instead of selling individual trade ideas, all salespeople will need an intimate understanding of market structure under the new rules. At the same time, high touch salespeople who’ve been used to approaching clients with trade ideas contained in research are being spooked by the fact that research becomes chargeable under MiFID II and that by simply communicating the research they won’t be adding much value. “Sales is becoming a nothing,” says one headhunter. “Clients will pay for research and they will pay for trading, but they’re not going to pay just for sales. Salespeople know this and are starting to panic.”
Insiders say this lack of clarity about the future is prompting senior salespeople to become defensive. Unwilling to share top accounts with juniors at the best of times, in the run up to MiFID II senior staff are reportedly more protective than ever. “Equity sales just isn’t a growth industry,” says the global head of execution services at one firm. “You have research people themselves becoming more commercial and selling their ideas to clients directly. Salespeople risk being squeezed out and if the senior ones start hoarding the best clients, there’s nothing left for the young people coming up in this space.”
This might be the reason J.P. Morgan is said to have preemptively cut back on offers to equity salespeople this year. However, it’s not all bad news. Once the uncertainty of MiFID II’s launch has passed, it’s possible that salespeople will find themselves on a stronger footing as their role becomes clearer. At this point, the sales juniors who’ve stuck with it could be at a premium. Oliver Rolfe, founder of search firm Spartan International, says there’s already a lot of demand for mid-level salespeople with strong client franchises, who can manage teams in the future, but acknowledges that banks are in “defensive mode” ahead of MiFID II. “If things work out better than expected, banks will be hiring on a wider scale again in 2018,” Rolfe predicts.
Today’s disgruntled sales juniors could yet become tomorrow’s hard-to-find hires. Or at least, that’s what they might want to tell themselves to keep morale up in the meantime.