Serve Client Needs, or Die

Serve client needs, or die by David Merkel, CFA of Aleph Blog

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.

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About the Author

David Merkel
David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

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