Future of Institutional Sales: Death by a thousand cuts?

I am aware that there have been several forums started pertaining to the specific roles on a sales desk, but I want to discuss the viability of building a career in institutional sales from the perspective of a 24/25 year old...all I hear from vets in the business is that it will eventually die and that they make good money and that this field will be able to provide them a good living. However, consensus is that an institutional salesman will never make the kind of money they were making pre-crisis.

I'd like to reference these 2 links that were forwarded to me by a seasoned equity research salesman:

http://www.integrity-research.com/cms/2012/04/24/…

http://www.reuters.com/article/2012/04/20/banks-e…

Just as a disclaimer; I am currently on the buy-side so I do not have a crystal clear interpretation of the institutional sales business model, so all you industry vets on the site, feel free to give me the standard WSO bashing if anything sounds stupid.

1." As we have reported before, the IBM Institute for Business Value has predicted that 85-90% of total worldwide assets under management will move toward indexing or repackaged types of beta instruments over the next decade. Although we are a long way from this number, the reality is that many active managers act passively, especially during times of uncertainly. Market participants say that turnover declines as portfolio managers trade fewer names and hug the indices." -- from the first article

--> To say that this will be the case for the next ten years seems like an aggressive statement to me. Nonetheless, with the expected increase of a shift from active management to passive management and thus a lower turnover rate that more closely hugs indices for hedge funds/mutual funds, we will unlikely see a long term return to, or a shadow of pre-crisis trading volumes. Thoughts? Playing devil's advocate, but doesn't this imply less of a need for equity/fixed income research from the sell side if there is less stock/bond research being done due to lower buying levels from the buy side?

-->My understanding is that with impending regulation on I-Banks, there is a serious threat to overall market liquidity which would obviously have a HUGE shock on the system. I have spoken with some senior analysts at my shop and they have been to several conferences with central bankers and the overall message pertaining to this issue is that they do not know how they are going to address the liquidity issue, but they understand the immediate negative impact illiquidity would have on the financial system, so they are still searching for a solution, so i am not too to worried about this issue.

--> Again, I do not fully understand the intricacies of the markets, but regulators are trying to promote a buy-and-hold environment where participants have more skin in the game, which ultimately means less trading volume for broker-dealers, which in turn, means lower commissions for the institutional salesman. I believe that EVENTUALLY regulators will have their way, more so than they already have and trading volumes will stay low.

2. Lower trading fees due to electronic trading

--> My sources tell me that the sales-traders that used to sit beside them that were laid off aren't even looking for another sales trading gig.

3. "Although clients will pay a premium for advisory, that premium is declining creating commission compression. Industry sources say that Goldman Sachs is automating as much as its cash equities as it can, relying on the strength of its banking (and the expectation of IPO allocations) for relationships rather than high cost advisory services." - First article -- another crusher to the sell-side salesman's business model?

4. The first article mentions that with diminishing research/sales desks in BB's, MM I-Banks will scoop up their clients.

--> I like this because a decentralization is good for kids from non-target schools/prestigious backgrounds who would have a better chance of getting on MM desks. However, the flow of business to MM's to I-Banks seems like a temporary plus for MM's if the business itself is dying out. Why would BB's exit the business if they did not see this business as profitable going forward?

I work at a boutique bond shop and have had several conversations with our head of ABS. He's pretty sharp and has been trading structured products since '85, so he really knows his stuff. Supporting the fact that several BB's have completely left the ABS/structured sales business because they did not see it as being profitable in the long-run (ie UBS), he said that with the ever-decreasing level of deals coming to the market and thus lower dealer inventory has squeezed about half of his Rolodex out of the business.

I am aware that bond sales is a different beast...
My understanding is that bond salesmen have historically made more money than equity research salesmen mostly because they are more valuable due to the fact that there is a higher need for coverage due to the sheer number of bonds on the market is much higher than the number of stocks. However, lets say that even if trading volumes pickup in the bond market and thus dealer commissions will increase, wouldn't this increase in commissions be offset by the squeeze in spreads from the ever increasing efficiency and transparency of the bond market? In other words, it is easier for a buy side trader to source liquidity in bond markets and therefore will squeeze his dealers' commissions?

I am certainly playing devil's advocate here and hope that I am missing something, but it seems like the institutional sales business is slowly dying, whether it be equities or FICC. I thought that this was a space that I could thrive in, but the last thing i want to do is hustle my way on to a desk as a SA and there not being enough growth in the business to ever be promoted and eventually build up a solid book and earn a high income?

I know that there will always be a need for someone with solid communication skills to speak intelligently so even if this business dies there may be SOMEWHERE for these guys, but will these guys ever make good money again? I didn't get into this shit to make a "decent" living. Sorry, but that's the truth. I'm a salesman and will never be a PM and I am skeptical that there will be a alucrative business for the intelligent salesman in the future.

If this business is dying, what is the next frontier for someone who possesses the skill set of a salesman? What is a good path to go down? Although it may not be representative of the industry, the business development guys at my buy-side have the most boring and slow-paced sales gig and could not see myself in their shoes. PWM is not for me. Wholesaling retail funds is a dead end in my eyes.

I'd like to hear people's thoughts on the future of institutional sales, and bigger picture, for those of us who see themselves as salesmen where recent grads/people with a few years of experience should position themselves in the industry?