A sales role in the Indian fixed-income securities market
I worked on the Fixed Income, Currency and Commodities Sales desk at Merrill Lynch in Mumbai. For the final two weeks, I was actively acting as a salesperson and a broker for fixed-income securities like corporate bonds and debentures. I know it does not fit into traditional notion of sales and marketing. But I feel there were a number of lessons which can be applied from the sales and marketing functional area to the role I played and vice versa. Below is a snapshot of my learning.
A brief background of the market
The market for fixed-income securities issued by Indian companies is limited and illiquid. The liquidity falls exponentially below the highest investment grades. Hence the most active sellers of these securities are large Indian corporates with good credit ratings. The largest and active buyers are mutual funds, insurance companies, government agencies like LIC, IFCI, IDBI, UTI, EXIM, etc. Smaller buyers include PE firms, specialized banks, etc. The liquidity in this market also depends on the issuer and the sector of the issuer. For example, debentures issued by manufacturing companies with assets as collateral are preferred and need to pay lesser interest than those by IT services companies.
The deals are arranged by brokers like Merrill Lynch, Deutsche Bank, ICICI, etc. in the OTC market. They are in touch with both the buyers and issuers of such securities throughout the year and work to service individual client needs. However since a number of brokers are active, there is significant competition in this arena. Usually, the only criteria used for choosing between competing brokers is the price they negotiate for their clients. The quickest broker to provide an acceptable price wins the deal. Clearly, the way to win as a broker is via superior sales strategies.
So how do you differentiate?
Information asymmetry – The sales manager for Nirma uses the power of his brand to sell his product while a Big Bazaar uses the volume of sales as a tool to offer lower prices and entice buyers. Here, information is the salesperson’s biggest sales tool. Being an OTC market, there is significant information asymmetry and it is very important to be well aware and well connected. By performing market information dissemination, brokers perform a service for their clients in hope of getting business. They perform price discovery for each security and negotiate an agreement to pocket a commission. Through their intimate knowledge of client preferences and history, they perform number of additional value added services like connecting preferred sellers to issuers, providing kickbacks on older deals, doling out favors, disseminating market information to clients, etc.
Personal relations – This is an important differentiator which helps clinch deals. Trust by your clients in your evaluation of the market will get you business. This is developed by knowing your clients well and being able to read what they do not say. For example, there can be very different meanings when person A says that ‘It looks difficult to do this deal’ than when person B says it. If person A was a Japanese, it would mean a refusal to do the deal while if person B was American, it would mean an interest in negotiating further. Knowing your client is how this difference can be judged.
Personalized service – By understanding the needs of the issuer and customer a priori, brokers can signal a personal interest in the business of the clients. For example, brokers track when a large commercial paper (CP) issue bought by client XYZ from issuer ABC is about to expire. As a result, they can proactively ask ABC if they would like to again raise money by issuing a fresh CP two weeks before the maturity. Simultaneously they can track what XYZ intends to do with the inflow of money at maturity and if they can fix up a deal with another issuer. They can perform superior price discovery, work faster to sell securities and clinch deals without too many competitors even coming to know of the deal. Also, by knowing the urgency of the situation and more information than competing broker, one can get a better deal covenants, spread positive reviews of the clients and enhance or tarnish their image.
Employing these three strategies can consistently get you deals and clients in this market and help you become a successful securities salesperson.
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Profile: Siddharth Chaudhari (Dbab:8chaudharis, Facebook:sidkc, cell:9726646215, ext:7513)
Reports say that Siddharth is as an electrical engineer from IIT Bombay. But many, including the Placecom, are still looking for proof. He achieved a few accolades, played competitive hockey and had a lot of fun in those years. So, when Intel later promised him to show him around the world, he pounced at the chance to work as a Technical Marketing Engineer. He loved traveling to Taiwan, Japan, Korea and Singapore on the job. Unfortunately he got the ‘chaska’ of the marketing life from a certain Andy of the marketing team at Intel and decided to dabble in it himself by joining WIMWI. He ended up interning with the sales role at Merrill Lynch. In his second year at WIMWI, he has his exchange term and beer on his mind most of the time.
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Uncensored posts up on personal blog >:)
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