Wall Street is figuring something out about its clients ? but it should've known this years ago
There is a bit of a mystery on Wall Street, and it goes like this.
A Wall Street bank, lets call it New York Investment Bank (NYIB), has a hedge-fund client.
We do a lot of work on client planning. We do a lot of work in really fine-tuning client profitability and ... really you can maximize the wallet or the profitability of those particular clients and really have a smarter dialogue with them.
This is going on across the Street, as banks stop serving clients that don't deliver the returns they are looking for, and prioritize the clients that do.
"Today they have fewer resources to dedicate to client interactions, and client interactions by-in-large are less profitable than they used to be," Kevin McPartland, principal in market structure and technology at Greenwich Associates, told Business Insider. "So more efficiently managing client relationships is now a necessity, whereas pre-2008 it has less impact on the bottom line."
And some of the clients that remain will find they have a less hands-on service. Capital markets consultancy Greenwich Associates said in a note earlier this year saying that "less sophisticated clients are being directed to e-trading solutions and junior sales traders.
That sort of treatment has long been common in equities (think Michael Lewis' Liars Poker and "equities in Dallas"), but it is now permeating the bond market too.
"The growth of e-trading in fixed income has expanded this form of client tiering considerably," Greenwich said.
At the other end of the scale, you have Wall Street banks prioritizing their best clients. Bloomberg reported last week that the equity research desk at Citigroup for example has a list called the "Focus Five." Other banks have scales, where some clients are designated platinum, gold, silver and bronze.
It is kind of incredible that Wall Street took so long to figure this out.