Reflections on Sell Side in 2011


TabbForum has an interesting article, on Investment Bank ‘IB’ focus last year.

Looking across business lines, it bullet points challenges, market share stats, and suggests some strategies for adapting to increased regulation, and shrinking wallet trends, and how IBs can better serve clients.

Much of it makes sense. The author Robert Lyons, was SVP at MF Global.

Here are some points from the article.

Investment Bank revenues: $145bln ($165bln in 2010, $200bln 2009)
FICC: $75bln
Equities: $40bln (Cash 35%, derivs 35%, F&O, prime Services 20%)
Banking: $30bln

Distribution

  • Coordinate client “touch points;” profitability starts with sales accountability; align to client needs vs. opportunity
  • Analyze market share across all products; see your holes in coverage
  • “Client First” strategy works; know what clients value most (least)

Trading

  • Relationships still matter clients trust few hands; strong execution can get 20 percent more than research vote would warrant; sales traders must get more of client’s total wallet; traders must be more commercial
  • Electronic trading is huge slice of commission pie; 75 percent of clients use algos,
  • Price discovery evaporated; trader has turned into execution consultant
  • Clients measure slippage better; know your clients benchmarks

Product

  • Research matters; must fit clients’ needs; value-added content counts
  • Research should NOT cost more than it’s worth; tie it to the business; make it more commercial by NOT overselling it

Management

  • Managers must manage, must produce, must work for the producers, must be the “glue,” must be client facing and must be accountable

Conclusions

  • Know yourself. Can’t be everything; convince yourselves, then convince clients; measure results vs. plan, vs. peers vs. all others
  • Know your clients. Know them best; connect with decision makers, know client revenue streams and fully understand their revenue payment process
  • Don’t get marginalized; many potential intermediaries between you and client; and get to your proper place on clients’ total revenue run

Yes, well here’s the full article here

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