Employing quality salespeople pays off for fixed-income dealers, according to new research from Greenwich Associates.

The research found that dealers can greatly improve their chances of securing a position on customers’ lists of their top three dealers, “by employing sales professionals regarded by institutional clients as the best in their field.

“Greenwich Associates first set out to quantify the ‘lift’ that a fixed-income dealer experiences if it employs a top-ranked salesperson,” explains Greenwich consultant Giovanni Carriere. “To do so, we asked institutional investors to name their leading fixed-income dealers and — separately — to rank their fixed-income sales people according to quality. When we analyzed the results, we found as expected, a meaningful correlation between firms with sales pros ranked in the top three and institutions’ top-three dealers — but a deeper look at the results generated even more valuable insights.”

The correlation coefficient between firms employing a “top-three” sales person and those ranking as a “top-three” dealer tops 0.47 for certain fixed-income products. “This statistically significant correlation is both positive and solid,” says Bill Russell, Greenwich Associates Director of Research and Development. “The correlation is even higher when looking at the relationship between sales people that are rated by institutions as the absolute best and lead dealer positions. For some products this correlation exceeds 0.50.”

“Put simply, the quality of your sales reps in the eyes of your institutional clients is a key factor in determining how much trading volume your firm will capture from each customer,” Greenwich consultant Woody Canaday explains. “Firms that focus on hiring, developing and supporting the best sales professionals have a significant advantage in the competition for coveted ‘top-three dealer’ positions with institutions.”

The research found the strongest connection between sales rep evaluations and dealer rank in emerging market bonds. “Investing in emerging market bonds requires specialized knowledge of local credit conditions and currencies, in addition to an understanding of political, macro-economic and market trends,” says Greenwich consultant Peter D’Amario. “Sales reps are especially valuable in a market like this because, in many cases, they are the ones able to bring all of these sources of information together.”

Meanwhile, the link between sales staff quality and dealer rank is most tenuous in products like U.S. Treasuries, in which a significant proportion of volume is traded electronically. In such products, sales people have less opportunity to add value and pricing is a bigger driver of allocation than service quality, the firm said.

The value of having top-rated sales reps also varies according to the type of client targeted by sell-side firms. “Employing a top-three sales rep is most important for dealers competing for top-three positions with hedge fund clients, for which the correlation between sales performance and dealer rank tops the Greenwich Associates research at 0.40 across all products,” says Greenwich Associates consultant Frank Feenstra. “The link is slightly weaker with funds and banks.”

The firm also attempts to determine what makes a good sales rep. It reveals several characteristics shared by top-ranked sales reps and several other traits that influence investor preference when evaluating sales professionals in specific fixed-income products.

“If you were to ask 10 institutions to describe the perfect fixed-income sales rep, you would most likely get 10 different answers,” says Greenwich Associates consultant Tim Sangston. “But when we asked institutions to specifically list the qualities they associate with the best fixed-income sales professionals, two responses stood out: providing market information and intensity of coverage. Taken together, these responses suggest that, for many investors, the best sales rep is the one they speak with most often.”

At the same time, Greenwich Associates discovered that the perceived value of sales rep qualities varies greatly depending on the specific product in question. In particular, investors’ needs and the attributes of the best sales people display significant differences across “value-added” products (such as collateralized debt obligations, leveraged loans, etc.) and “flow” products (such as treasuries and agency bonds). “Frequent client interactions are essential for sales people in all fixed income products, but in terms of the content of those interactions and the specific skills required, institutions are looking for different things in flow and value products,” adds Canaday.