Sales jobs in investment banks aren’t what they used to be. As banks automate trading systems and render the entire sales and trading process more data-driven, established salespeople are losing their jobs (just ask the fixed income salespeople at Goldman Sachs). The sales-skills of the past aren’t the skills of the future. Want to survive in sales? You’ll need to adapt.
We spoke to Arran Yentob, a partner at consulting firm Oliver Wyman who’s been working with leading investment banks as they reconfigure their sales and trading businesses. Here’s how he suggests things are evolving – and how today’s salespeople can make sure they still exist tomorrow.
Sales jobs in investment banks are being shaped by three distinct forces
Three things are driving banks to rethink how they structure their sales functions, suggests Yentob: resource constraint, data, and market structure.
Resource constraint is about balance sheet, and man hours. As banks cut risk weighted assets (RWAs) in preparation for so-called ‘Basel IV’, they’re having to be a lot more careful about allocating capital and placing trades that will generate additional RWAs. “Banks are having to become smarter about their allocation of financial resources – and where and how sales direct their time,” says Yentob. Once upon a time, a salesperson might have called a client because he liked them and sold a product because it generated revenues or short term profits. Now, they also need to weigh-up which trades are viable in terms of balance sheet (something that’s behind Deutsche’s upgrade of its trading systems under Sam Wisnia) and whether that client is worthwhile.
Data is all about using data to serve clients better. All banks now have complex customer relationship management (CRM) systems that enable them to track clients’ behaviour and to work with them more efficiently. Servicing clients is no longer about a salesperson’s ‘nose’ for a client’s needs: it’s about using the CRM tools to establish when to call clients and what to pitch to them.
Market structure is about the demise of market making. Instead of making markets by holding securities on their balance sheet – however briefly – until they find a seller, banks are increasingly acting simply as intermediaries and matching buyers with sellers in an agency trading model. “Market structure is changing – with electronic and agency trading increasing ” says Yentob. Who needs a human being when computers can simply bring buyers and sellers together (unless, of course, the market is hugely illiquid)?
Banks are segmenting clients and allocating salespeople accordingly
At the same time, banks are putting a lot of effort into dividing clients into segments. Banks like J.P. Morgan have been tracking their most profitable clients for years; Deutsche Bank said last October that 30% of its clients generate 80% of its revenues. “Banks are segmenting clients in order to allocate resources more efficiently and to serve them in the most effective way,” says Yentob.
The standard segmentation is between high touch clients which require a lot of human interaction, and low touch clients which don’t. Yentob, however, says this is an over-simplification. “Clients are segmented by the nature of their behaviour. Do they trade liquid products electronically, or do they trade illiquid products and require human beings to structure a solution? How often do they trade and how much? How many different products are they trading with you?”
The high-touch, low-touch model is the basic structure, says Yentob – it’s just that there are gradations in between.
Low-touch sales jobs are still highly complex, but are more about coordination than deep product knowledge
If you have a more low-touch sales job, you’ll be working with clients who mostly trade electronically and who don’t require a lot of human interaction. This may sound easy, it’s not: the number of clients you work with could be huge.
“Many low-touch models will still require sales headcount to interact with clients,” says Yentob. “They will be covering a much longer list range of clients and to be successful will need efficient CRM/technology tools to manage their time and understand their clients.” How many clients? Anything from 50-100.
This is an entirely new kind of job, Yentob says. Clients who are in this so-called ‘low touch’ category were often under-serviced before – they were called-up rarely, if at all. Using the new CRM and electronic trading infrastructure, they can now be serviced very efficiently by salespeople who can help them use electronic trading systems more efficiently.
Low touch sales people still need to be good communicators, says Yentob: “They need to be structured thinkers who can manage activity across a long list of clients and work well in a team that, long term, will become more cross asset in nature. “(UBS MD George Athanasopoulos predicted in May that the salespeople of the future will need to work cross-product.)
Low-touch jobs are comparatively few. With each low-touch salesperson servicing up to 100 people, most banks employ no more than 30 of them.
High-touch sales jobs are for established salespeople, but you’ll need deep product knowledge and structuring ability
If you’re an established salesperson in an investment bank, you’re more likely to aspire to a high-end high-touch sales job working with core clients on complex and illiquid products, than a low-touch role working with non-core clients who mostly trade electronically. These high-touch jobs pay more and are more plentiful. But do you have the right skills?
High-touch sales people with, “deep sector, product or solutions expertise will continue to stand out,” says Yentob. They need the expertise to assemble solutions which meet clients’ risk requirements. They also need to be able to talk to clients about their overall requirements and the nature of their relationship with the firm.
Salespeople who’ve been used to dealing with core clients on a superficial trade-by-trade business, therefore will not necessarily survive.
There’s a need for high-end relationship managers
At the very top of the tree, Yentob says there’s a need for high-end relationship managers who can work with core clients to ensure a bank is fulfilling their needs across the entire range of products. “For the largest and priority accounts the ability to deliver the firm, understand the client and manage across the account is critical as clients look for a few true partners where they allocate the majority of their business,” says Yentob.
Goldman Sachs’ new Client-Relationship Management and Strategy Group, would seem to be an extreme example of this. Formed in April, it’s all about keeping the bank’s top clients happy and is staffed by Goldman’s most senior and effective salespeople. Morgan Stanley has something similar, known as the ‘senior relationship management team.’
“These are much more senior roles than you’ve seen in the past,” Yentob informs us. How do you get one? Some banks are allowing their best low-touch salespeople to train for senior relationship management roles.