Why Does Nobody Talk About Equity Sales?

I don't think I have ever seen anything recent on this part of a BB. Surprising since it considered FO and that is what most on this forum want. What do you guys see as the future of institutional equity sales?

 
Best Response

I spent a summer on the equity floor of a BB, and this was my take away, along with insights post-internship from interactions with the buyside

Equity sales is primarily driven by relationships for the more old-school type buyside funds. The top things a bank can provide in the equity sales front is the following: entertainment, access to management (unless the fund already has that...and many do now), access to equity researchers, industry and company primers (to get up to speed), and cross selling (a la prime brokerage).

Regarding the future of it: So long as humans are making the buying/selling decision, there will always be a client base that wants high-touch coverage (sales traders, salesmen taking their clients out). Sales is usually the gatekeeper for equity analysts, but the sales people can be cut out as the middleman here. So the industry prospects don't look to be growing.

Banks host industry conferences, this is one of the ways they control access to management. You need to be a client of the bank to get an invite, and for many funds, equity sales is your way in.

Think of equity sales as a gatekeeper to information (management/research) and as a point of contact to upsell the customer (prime brokerage, and if the fund does work in FICC or any other products, then introducing sales people from that product). They also update the client on whats happening in the market, and provide color on what type of funds are buying/selling (more so from sales traders):

Example: "Hey client X, I know that you guys have a 5% stake in ABC co., Just wanted to let you know that we are seeing multiple buyers in that name from long-onlys (asset mgmt) today.

Now the fund knows that there is incremental demand for this stock. Is there any new info? is this a good time to sell shares at a small premium? This extra demand = more liquidity, if the fund wanted to exit their position, this would be a good time to start doing that. Is it the first day of the month? (mutual funds receive capital from IRAs at end of month, so they need to allocate the money now. if this were the case, the news isn't that important as the new demand is just noise because mutual funds HAVE to allocate the new capital). How big of demand is there for the day? enough to move prices up? If so, maybe the fund should wait to buy more until the long-only's buying is done and prices revert to its equilibrium prices. Just an example.

Those are the follow up questions to be deciphered.

Bottom line is that there is still value from equity sales people, but its more so in the relationship with the client, and that value is created by knowing what your client is interested in.

 

At the end of the day, sales is sales. You are groomed as an analyst by basically being the assistant to your superiors (VP/ED/MD), as an associate you need to start covering clients and gaining their trust. Exit ops are really to bring your clients with you if you lateral to another firm (presumably for more money, better quality of life..or some other reason). If youre promoted from associate to VP, its because they think you can start bringing in revenues.

At my BB, to be covered by a sales trader, clients need to generate ~100k in commission each year. The idea is, those who barely break through that number will be covered by analysts/associates. Now some bigger funds easily clear ~$10m/yr and those are the MD/ED relationships. As your small $100k accounts grow into bigger accounts (presumably because their fund is growing), you grow along with them via title and bonus. Those $10m accounts had to start somewhere.

*Lately I believe they have been raising the 100k threshhold, its a lot of work for small $$ in the grand scheme of things. Same trend has been going on in PB, JPM lifted their minimum from $5M to $10M according to a WSJ article last week.

Unfortunately there aren't really technical skills you build as a equity sales person. Personable skills, for sure, you have to know how to deal with people, and angry clients when you screw them out of their IPO allocation for a more important client, or your ER's investment hypothesis blows up in their face.

In summary, exit ops for you will be to bring your book of business to another firm where they pay you more, or to get promoted at your current firm. Whether or not your clients stay loyal to you is up to your interaction with them/them getting fired/PMs deciding who gets the trading revenues (This is a big one...they rank brokerages and allocate fees accordingly)/random luck/their fund blowing up/ you giving low quality coverage/ basically anything.

A lot of variables. Try and be in control of as many as possible.

Again this is from my experience and observations. I have to believe someone in equity sales would be a complete savage in the PWM industry later on. I don't really know much about private banking, but I think you could fall into that line of business too.

 

Everything Fuwu said

As an addendum, I would add that part of the reason it's so relationship oriented is that vanilla products are not exactly difficult to come by, nor is the accompanying analysis the sales desk provides going to be any more in-depth or insightful than what the client already has. For example - three banks could make the market for the same block of stock for the same pension fund with a marginal (if any) pricing difference. The material advantage one has over the other is negligible, and the fund has an entire team of analysts that already did their own research. As everyone's said, it's certainly not going anywhere, but it aint growing either

IMO, there is still plenty of opportunity for exotics and ETF type sales platforms. Unit trusts, ETFs - really any structured product - allow for a level of diversification and flexibility that is becoming increasingly appealing to the retail world. I'm personally long triple levered inverse Nicaraguan nickel which would not have been possible in the archaic world of equity and debt sales

 

I wrote something about sales a while back. I moved from a BB to a smaller bank with my book of client and that was a good day. You are the money in sales and it's hard to replace a good sales guy. Now cash equity sales is a bit dull as you are a bit of a PA in some ways for your clients. I wasn't in cash sales and even my job got a bit dull at the end. I decided to change career completely, but I had an amazing time doing sales. I'll definitely still be doing sales in one way or another, and those skills I built are transferable anywhere.

 

Depends on where you work, what you do, and how good you are. Equities are good right now because there's tons of volume and spreads are widening. It's tough to say, but about $0. Haha, actually I think it's pretty standard now, or was until last year. $60-70k base first year, 70-80 base 2nd year, 90 base 1st assoc. And as far as bonuses go, nobody knows. Used to be about same bonus as base, but no bonuses are down 80%. If you're a rockstar, the bonus is unlimited. You earn what you're worth, let's put it at that.

 

Since I feel guilty now..

Respectfully, judging from your post, you are clueless about what people do in the S part of the S&T. You need to stop applying online and start researching more about the position. If you know someone, you should talk with them on more of the day-to-day activities and search the forum.

My guess is that your best bet is, after you decide this is your dream job, to go back for an MBA from a program where at least the MM firms recruit and go from there.

 

Equity sales has at least two primary functions (that I am aware of as a buy side client, at least):

1) Equity sales professionals act as account reps to connect a buy side investor with a sell side research analyst. This can happen several ways, including blast email communication and targeted phone calls to buy side clients, as well as acting as a filter as buy side analysts try to directly reach sell side analysts (you usually have to reference the sales rep you have coverage with at that specific wire house and the SS analyst will look it up to confirm). In this case, both the research analyst and equity sales rep would get paid if the buy side trader places a trade with that firm (which is not required for every interaction).

2) To facilitate block and basket transactions between two or more buy side clients (i.e., over the counter trading).

Compensation declined sharply for equity sales reps more than a decade ago when trading went to decimalization from fractional trading, thereby lowering the commission cut. Sales / research took another hit after the global settlement as well. You can still make good money if you have a strong client base but it's harder today than it used to be.

 

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