An equity analyst recently joined Deutsche Bank Securities and made a surprising discovery: The bank’s sales force was able to get her meetings with key clients across multiple regions—something that the sales team at her former employer, a large U.S. bank, had never done, according to Craig Bench, Deutsche’s co-head of Americas equity distribution. He notes, “It was a vivid reminder that relationships matter.”
That’s not a huge revelation, though it’s often discounted. Despite the transactional ethos on Wall Street, relationships remain central in finance, especially for sales teams that provide tangible links between the sell side and the buy side. Sales teams for research groups are responsible for cultivating buy-side clients, gaining their trust, understanding their needs and providing advice.
The 2016 All-America Sales Team ranking reveals that Deutsche Bank is No. 1 with investors this year for research sales, leaping to first from fourth place and besting Morgan Stanley, which fell to No. 2.
Bench, who’s based in New York, credits the German bank’s emphasis on product, teamwork and proven leadership for its ability to build successful relationships with the buy side. “We believe our sales force is one of the most content-focused on Wall Street,” he says. “In addition to being passionate about helping our clients generate alpha, our sales team is incredibly collaborative across regions and products.”
That team, Bench explains, has a depth of experience and knowledge of both the bank and the buy side. “The majority of our sales leadership across the country has been at Deutsche Bank for more than a decade,” he says. “That kind of continuity is powerful and helps reinforce our unique sales culture.”
Focusing on content means sell-side sales teams increasingly are attempting to distribute an array of products to clients beyond investment research to attract more business for the firm. To that end, Bench points out that Deutsche’s sales operation is attempting to communicate more effectively across its broader equity business. “Our derivatives, prime finance and execution sales teams maintain a regular dialogue with our advisory sales team,” he says. “We have also begun to be more coordinated with our peers in fixed income, something that banks across the Street have historically struggled with. Our improved coordination has yielded tangible benefits for our clients.”
Similarly, Morgan Stanley’s New York–based head of global equity sales, Nick Savone, notes that his equity sales team focuses on being global and offering product ideas from the entire firm, not just the equity division, with each salesperson “expected to establish relationships more broadly away from just the client’s investment team by tapping into the multitude of products and expertise at Morgan Stanley.”
However, even as salespeople peddle more complex products, like derivatives, to their clients, research remains “the most important product that we as a team leverage for our clients,” says Savone. “This helps us foster a strong sense of credibility and partnership with investors. If we don’t have a high-quality research product, it becomes a challenge to ask for business in multiple areas.”
Building a fruitful partnership with the buy side is the key to being a successful salesperson. When hiring, Savone says, he seeks out people “who bring together a passion for markets, people, idea generation, relationship management and finding solutions for clients.”
The demand for expertise is steep. The sales staff at Deutsche Bank is expected to know a lot, especially because the bank has a more generalist sales force. “A salesperson can gravitate toward certain sectors — tech, consumer, etc. — more than others, but as a generalist you have to be proficient across sectors,” Bench says. “You have to be multifaceted and understand the key drivers and inflection points of different companies and industries.”
For its part, Morgan Stanley organizes its sales force by region, theme and sector. But, says Savano, “given that most of our clients based in the United States allocate most of their time and capital in the U.S. market, our U.S. sales team takes on more of a generalist approach by providing global coverage for our clients.”
The best salespeople tend to be bankers and advisers to the firm’s institutional clients. A key strategy, Savone says, is to “leverage” research by providing investors with access to sell-side analysts, and vice versa, and maintaining a dialogue. Amy Zhang, an equity analyst at Delaware Investments in New York, says Morgan Stanley has “among the best sales teams on the Street. They’re passionate about the business, always pitching ideas that are value-added to my investment process, extremely responsive to requests or needs.
“In particular, I always appreciate and I’ve been impressed by the extensive access they have provided to management teams, industry experts and Morgan Stanley research analysts.”
The sell side appreciates that access as well. Justin Patterson, an Internet analyst at Raymond James Financial in San Francisco, whom Institutional Investor named a Rising Star of Wall Street Research this year, is grateful for the boost he gets from his firm’s sales force. “I’m still fairly new within the industry as a publishing analyst, and they’ve been great at introducing me to clients and cultivating relationships,” he says.
When Patterson puts out a major recommendation or industry report that investors are clamoring for, he relies on his firm’s salespeople because “there’s a finite number of calls I can take in any given day. So if they’re on some of my calls and get a gist for how I’m answering questions, they can then go do their own calls.”
Jonathan Rosenzweig, Citigroup’s New York–based head of Americas equity research, agrees on the importance of sales teams. “They certainly play a significant role in helping to get our products to clients that matter, clients that pay the firm and are important to us,” he says. “The sales relationship with portfolio managers is particularly important. We produce a huge amount of content every year, so they’re helping to digest it and get it to portfolio managers.”
Possessing a working knowledge of the firm’s research can be a challenge given the volumes produced by some sell-side firms and the often-complex nature of the material. Savone estimates his sales force has to stay current on about 1,000 companies in the U.S., plus 3,400 elsewhere.
“You don’t need to know everything about a company, sector or product,” Bench says. “A good salesperson develops a knack for knowing when something is truly relevant versus when it’s noise. Our best salespeople develop the skill to know when something is differentiated, actionable or when it’s really going to strike a chord with a client. And as you get to know your client better, you become much more effective at your job because you know what they’re looking for and which of your firm’s products can help them best achieve their mandate.”
Investment managers rely on the sales teams. “We find that Deutsche Bank is much more than an information conduit,” says Richard Excell, a senior portfolio manager at Wolverine Asset Management in Chicago. “They provide a fair amount of new-idea generation, but most importantly they stay visible on trade recommendations and continuously follow up with any new information, news or research that impact their ideas. They behave and think more like portfolio managers, whereas much of the competition is in the e-mail blast, cut-and-paste mode with very little follow-up.”
With e-mail, voice mail and web delivery, there are lots of ways to distribute research. “The sales team’s job is therefore not just distributing research but providing context around it,” adds Excell, who particularly values Deutsche’s energy sales team morning e-mail. He calls it a must-read that “draws information from all of Deutsche Bank’s resources — analysts, traders, commodity teams — to get a full picture of what’s driving the names in the energy space on any given day.”
Another important aspect of building a client relationship is understanding a manager’s investment process, then delivering only relevant information. Clients are bombarded by information, so “it has never been more important for our salespeople to have a clear understanding of their needs,” Bench says.
Savone notes that Morgan Stanley salespeople can get promoted by knowing how best to filter information for each client’s specific needs — doing so not just in a reactive manner but in a proactive one, with a sense of urgency to provide ideas to clients they may not have considered themselves.
“Not every team wants to be covered in the same way,” adds Excell. “A strong [sales] team will understand the idiosyncrasies and deliver to each team what is needed.”
In the end, the best salespeople are those that develop clients’ trust and confidence. “We like to see their ideas, not necessarily because we would follow them but because it shows conviction behind the information in any report,” Excell says. “It’s paramount for the sales teams to take ownership of these ideas, as too often we see ideas thrown against the wall with the only follow-up being on the few that work, while those that don’t are forgotten and buried.”