Traders at money management shops are worried about a decline in the quality of the services they receive from their brokers as they dole out less in commissions, according to a recent report from Tabb Group.
The research house and consultancy expects total commissions paid by long-only money managers to decline in 2012 for a third straight year. That is leading brokers to reduce the number of their staffers that service the buyside.
“In response to deep cuts in revenue, several of the sell-side brokerage firms are cutting back on headcount, consolidating trading desks, scaling back coverage and continuously reducing the level of resources across the entire firm,” report Tabb analysts Cheyenne Morgan and Miranda Mizen.
The buyside is worried that the cutbacks will leave them with a “middle-of-the-road” service as the duties of their high-touch sales trader and their low-touch electronic trader are handled by a single individual.
Tabb reports that buysiders are worried that that individual may not do both tasks well. Also, concentrating both jobs in a single individual could result in a loss of the anonymity that is the hallmark of the electronic desk.
Tabb is predicting commissions paid by long-only shops will decline to $7.6 billion this year, from $8.6 billion last year.
