The Aleph Blog » Blog Archive » Serve Client Needs, or Die

Serve Client Needs, or Die

Another letter from a reader:

Hi David:

Happy new year!

I’ve been reading the blog for about six months now and can’t thank you enough.  I have found so many of the post to be extremely thought provoking and helpful.  I also appreciate your openness about your faith.  As a young Christian man in the finance world I find it very encouraging.

I’m contacting you to ask a few questions but before I do that, let me give you some context.  This past April I started in sales on the fixed income trading desk at XXXXXXX.  My desk in particular is more “middle market” focused and has a strong tax exempt muni bias.  Although there is an effort to grow our mortgage business, most of our taxable business would be considered more “retail”.  That said, I have spent my last 10 months or so traveling YYYYYYY visiting with all sorts of institutional investors trying develop relationships that will eventually result in a trading relationship.  I’ve met with anywhere from small community banks, to a larger insurance company, and even sat down with a few portfolio managers at a state pension fund.

What I’ve learned from this experience is that one, we don’t have much of a “call” into some of these folks.  One example is the pension fund.  They really aren’t gonna care on any of our exempt positions and we dont bring any large taxable deals for there to be a great fit.  Ive also learned that there are many internal hurdles I am going to have to endure in order to develop a sustainable network of individuals to call on. (Account assignment, crm software, trader skill

All this considered, I’m wondering if you have any words of wisdom for a young aspiring fixed income sales person?  Any dos and dont’s from the coverage you’ve had over they years?  What can I do to set myself apart from my competition?

I realize you probably get inundated with emails so no rush on my end.  Just thought I’d reach out. 

Dear Friend,

I get a lot of emails, but I am not inundated.  Let me give you the perspective of a former corporate bond manager.  I divided my coverage into three groups: those who produced value every day, those who could help me occasionally, and those who could help me rarely, if at all.  I was not like those at the company that acquired my firm.  I would do business with anyone, so long as they offered value.

Yes, that is more difficult to deal with than limiting coverage, but I was aiming to do the best for my client.

You are in a difficult spot.  Your company needs to align itself with the market; it needs to seek a niche where it can add value for clients in a way that fits their tax status, yield needs and liabilities.  Look for niche areas where intelligent investors could provide adequate yields with safety.  I had several brokers that specialized in niches, and I used them to a high degree.

This would require a research effort from your firm that would reveal values to clients and potential clients.  But with most business efforts, client needs come first.  Re-orient the business to serve client needs, or die.

As for you, individually study your clients and potential clients to see what they need.  See if your firm can deliver that.  If it can’t, you may have to find another firm.  Big clients won’t deal with anything but the main office of the big firms, unless the regional coverage is particularly clever.  Medium and small clients are often happy to work with a local or regional firm, or the regional office of one of the big firms.

As coverage, you can be:

  • Prompt
  • Attentive
  • Knowledgeable about how to help your clients (if you can within your firm)
  • Empathetic, Friendly
  • Honest (that goes a long way)
  • Reliable
  • The guy who knows how to find the other side of a trade.

That last one is important: I’ve known coverage that could pry illiquid, hard-to-find bonds out of the hands of parties who don’t know what they are worth.  That’s a valuable skill, but difficult to do, except with insurance companies and mutual funds, which have to report their holdings at the security level by CUSIP.

But if your firm can’t deliver what your clients need, you will likely just be a nice guy on the phone who eats up the time of clients.  I knew a number of those, and I never got much business done with them.  You would be better off with another firm, if you can make the jump.






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One Response to Serve Client Needs, or Die

  1. Doug says:

    I’ve worked on the buy-side for 28 years, with large firms and small. I also have/had 2 brothers and a father on the sell-side, so I have a sense of how things work over there.

    I always entertain new coverage. First, everyone deserves a shot. Second, you never know your luck. Some of my best coverage got to me via a cold-call. Third, I need to be able to talk with my family on Thanksgiving.

    But to get my business, people had to have innovative ideas about value (not just street-regurgitation), unique product, or outstanding execution. You can only really control the first. Your firm provides the product and the execution.

    The other thing coverage does for me is get inside my head and see what my portfolio needs before I do (because I’m tied up in meetings, etc.). They do this by keeping careful track of what I am buying and selling. That way they know what I own without asking to see my holdings–something I am allergic to giving out! And listening to what I think–not just explicitly, but in the context of the market.

    That’s how you can add value. And this is a relationship business. I’ve had coverage follow me across three of my own employers and six of his. Over the years, we’ve added a lot of value to my investors and his brokers. But it’s good, hard work. But doesn’t 2 Thess 3:12 and Eph 4:28 encourage this?

Disclaimer


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.


Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.


Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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