The research business may be undergoing massive changes, but the top sales teams are still the same.
For the third year in a row, JPMorgan Chase & Co. and Morgan Stanley have captured the top spots in Institutional Investor’s 2019 All-America Sales Team, the ninth annual ranking of the firms with the best sales professionals. JPMorgan retains its first-place position in the generalist sales category, while Morgan Stanley was once again voted the No. 1 firm in specialist sales.
The two firms remained at the top of the leaderboard despite a change in the survey’s methodology — which this year weighted voters’ responses based on equity commissions — as well as changes in the industry at large. The sell-side research industry has continued to be transformed by the shift from active to passive investing and by regulation such as the European Union’s markets in financial instruments directive, according to top providers. The unbundling of research dollars from trading in January 2018 made clients even more discerning, according to Nick Savone, global head of institutional equities sales at Morgan Stanley.
“Clients have adjusted behavior in a post-MiFID environment,” Savone said. “They are being more selective, consuming more of what they value, which has been beneficial for Morgan Stanley given our global research breadth and our overall product offering. MiFID has driven a need for clients to be more concentrated and thoughtful about where they spend their mind share and wallet share. This dynamic has driven the need for the sell-side to be more differentiated.”
Michael Bossidy, head of global equities sales at JPMorgan, concurred that the change in how clients pay for research has also changed the way clients consume research. “MiFID II will never come between J.P. Morgan and our client relationships,” he said. “The mechanism of bundled pay to a more unbundled model has changed, but it hasn’t changed our mission to deliver a first-class product to clients. There is more scrutiny on budgets and methods of delivery have sided a bit more towards lower-touch consumption, but the highest quality product with the most commercial sales teams behind it will continue to win.”
[II Deep Dive: Morgan Stanley, JPMorgan Boast Top Sales Teams]
Some 2,000 buy-side respondents representing more than 620 investment organizations rated the best generalist and specialist salespeople based on five attributes that included understanding of client needs, idea generation, and the ability to add value to research. Leaderboards ranking the top ten firms based on overall votes were produced for both specialist and generalist sales teams. One pair of leaderboards was compiled based on the commissions-weighting, while a second pair was created by weighting voters by assets under management.
In the commissions-weighted specialist category, led by Morgan Stanley, UBS placed second, while JPMorgan took third place. Deutsche Bank and Bank of America Merrill Lynch ranked fourth and fifth, respectively.
“We take a very client-centric team approach that offers a high degree of flexibility and expertise,” Morgan Stanley’s Savone said. “We have an ability to cover clients for global product seamlessly while also offering dedicated sector expertise as well as specific regional expertise. Doing this consistently is critical to our success.”
Morgan Stanley placed second in the commissions-weighted ranking of generalist sales teams, which was topped by JPMorgan. In this ranking, Citi Group placed third, BofA Merrill Lynch took fourth, and UBS ranked fifth.
“The keys to being consistently rated highly: Deep knowledge of our clients’ needs and consistent long-term client relationships,” said Daniel Antonelli, head of JPMorgan’s Americas institutional equities franchise sales.
The two top-five finishes for BofA Merrill Lynch were notable considering the bank was unranked last year. Susan Riordan, head of Americas advisory sales, reported that the firm has invested in its specialty sales efforts to include the energy, multi-industrial, technology, media, and telecommunications, and healthcare sectors. But “our generalists continue to lead the efforts on account coverage, tailoring Bank of America’s vast resources to help clients with their individual investment process,” she added. “From delivering research to organizing bespoke trips, our goal is to positively impact each investor at every account and help in their investment decisions.”
Like her peers, Riordan has also noticed an evolution in research consumption and changes to how sales teams can best add value. “Clients want research delivered anytime, anywhere, and anyhow — from traditional reports to podcasts, conference calls, conferences, bespoke trips and dynamic single stock idea discussions,” she said. “They want to access research on the go — on their commute from their phone, on their desktop, and in person with analysts. Clients want to discuss and debate single stock ideas. Bank of America is focused on innovative research delivery to provide the best connectivity with clients how and when they need it to add value to their investment process.”
Evercore ISI, the highest ranked independent research firm to crack the top 10 in II’s generalist and specialist sales rankings, is also investing in technology — and people, according to its head of sales Larry Sibley. “Our sales team has a great balance of seasoned veterans and rising stars; here we invest steadily in the training and development of that rising talent,” he said. “As importantly, we are investing in technology to better enable us to serve our clients. In the past 18 months, we have launched a new [customer relationship management] platform and rebuilt our research distribution platform. Both tools fundamentally help the sales teams serve clients more effectively. I expect technology investments will be critical as we continue to grow.”
But technology can be a double-edged sword when looking at potential seismic threats to the sell-side. “We see three threats — the first is technological disruption and the secular shift to electronic trading, which is mostly complete at this point,” Sibley said. “The next two have been widely covered — MiFID implementation and the shift from active to passive. Both of those transitions are still occurring, but it’s unclear when and how they will ultimately settle.
“[W]e may be reaching the point where MiFID works in our favor as clients recognize the value of our research and concentrate more of their research wallet with us,” he added. “In a similar way, consolidation in the industry drives further differentiation.”