Even as the Dow rockets to new records, speakers at the largest gathering of investment management sales people were in a less festive mood than usual. Institutional sales people, it seems, are more squeezed than ever. Rising stock prices may just be masking structural changes in the industry going on just below the surface at firms.

AIMSE Reports

Business may be getting tougher for investment managers, but that didn't stop more than 500 sales executives from gathering outside Palm Springs at the La Quinta Club & Resort for AIMSE's Annual Marketing and Sales Conference. AIMSE is the Association of Investment Management Sales Executives. The three-day conference ends today. The program included courses on professional development, workshops on sales and marketing related topics and featured speakers including Les Brown and Morris Schectman.

 "I was alarmed at the budget changes in the third quarter," Ronald Peyton, the president and chief executive of Callan Associates told those gathered here for AIMSE's annual marketing and sales conference in his keynote address. Peyton was commenting on the quick budget freezes that were announced when the stock market fell by nearly 20 percent last Fall. "Boom, firms were right in there with the ax," he explained.

Peyton blamed the quick reaction to the drop in assets under management and negative cash flows to a growing "corporate mentality" among investment management firms.

He also warned that plan sponsor clients may not look kindly on this type of mentality at investment management shops.

"Clients are looking for the long-term," he said. "They expect their fees to be reinvested in the business."

Peyton pointed out that the merger activity in the business and the globalization of the market are changing the industry. One fallout is increased fee pressure.

"More products are now being sold to the same sponsor," he said. This has the effect of lowering the marginal fee since the mandates are larger. A fallout of this approach is a proliferation of products. Peyton believes that product proliferation has gone too far and that firms are going to have to get rid of products that don't make sense.

Peyton was not alone among speakers in making these observations. Mark Gibello, Trust Company of the West, also said that firms "need to rationalize their product lines." Gibello spoke as a part of a panel on sales force management. He added that it has now gotten to the point where the investment side of the business needs to justify why the sales side should market the product.

The panel also noted that the increased pressure on revenues and fees is pressuring compensation of sales personnel.

"The salad days are coming to a close," said John Seiter, Capital Guardian & Trust Company, and also part of the sales force panel. "It is not going to be big ticket compensation going forward," he added.

Compensation is being squeezed as firms focus on profitability. Seiter said that he has not seen firms as focused on profits as they have been over the past year.

Also adding pressure is the undisputible fact that the traditional pension market for defined benefit plans is shrinking. "The marketplace is smaller today than last year, and last year it was smaller than the year before, and so on," he told the attendees. "The market is a finite market. If you are not structured for that going forward, you are in trouble," he concluded. 

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