A career in sales and trading can be both lucrative and exciting. However, it is not for everyone. Before you decide to pursue a career in sales and trading, it is essential to understand what the job entails and whether or not you have the skills necessary to succeed. In this blog post, we will explore the sales and trading career path, including what you can expect on the job and how to prepare for a career in this field.
1. What Are Sales and Trading?
Sales and trading are an integral part of investment banking. Sales and traders connect the corporate clients who need financial advice with the investors and other financial institutions that can provide advice and capital, such as hedge funds or pension funds. The specific job responsibilities of a sales trader at one bank might be similar to those of another bank’s trader but can vary from bank to bank. In addition, depending upon the specific job function of a sales trader, you might have additional responsibilities such as marketing and client management.
Sales traders are expected to meet with clients, and these meetings can occur in person or over the phone and often face-to-face when a client has requested it. A sales trader is responsible for building relationships with these clients, so being well-connected is necessary to succeed in this work line. They must attend industry conferences and network extensively to stay abreast of changing market conditions.
Sales traders must be very comfortable with the financial markets, especially derivatives products such as options and swaps. They may also need experience in mortgage-backed securities, futures, or foreign exchange. Sales traders must get clients to open accounts at their firm or switch clients to their firm. Their job is to expand the client base and maximize profits for the bank by attracting large numbers of traders, investors, and other institutions.
The role is also usually thought of as being split between two distinct areas:
– Sales traders work with investors and other financial institutions to sell them a bank’s products and services, i.e., they are responsible for finding new clients
– Trading desk head is responsible for the profitability of the entire trading desk, often working with their direct reports to optimize their performance and follow key performance indicators related to capital usage, position-sizing, risk management, etc.
2. Educational and Experience Requirements
The educational requirements for entry-level sales and trading jobs are not as strict as in some other investment banking areas. A bachelor’s degree is the standard, but many companies also hire traders with non-quantitative degrees that demonstrate strong analytical skills. Solid quantitative ability, including an understanding of statistics and financial modeling, is also necessary. Some firms may expect you to have a CFA designation, especially if you are applying for an entry-level management position, but it is not required.
Many entry-level traders are recent college graduates with only 1-2 years of experience who have majored in finance or another quantitative field. MBA graduates are also sought after by trading desks because they have the business knowledge necessary to understand their clients’ needs.
3. Skills Needed
- Strong quantitative/mathematical abilities
- Solid understanding of the financial markets, including derivatives products such as options and swaps
- Ability to build relationships with clients
- Experience using financial modeling software, especially VBA
- Technical knowledge of the foreign exchange, commodities, or fixed income instruments. Participation in online forums related to these areas is helpful.
- Experience using CRM software
- Self-motivated; excellent communication skills, both written and verbal
- Ability to work long hours in a fast-paced environment
4. Starting Salary and Bonus Structure
While the specific salaries for sales traders vary depending upon background, skills, and performance level, entry-level sales traders can make up to $100k per year or more. In general, compensation packages tend to be slightly larger for traders who move up into management.
– Entry-level traders can expect to start between $60k and $70k per year, with significant bonuses for solid performance.
– Managers can typically expect a base salary of $100k – $150k, as well as a substantial bonus based on their team’s performance.
Entry-level sales traders should expect to receive an annual bonus between 30-50% of their base salary. Bonuses consist of both cash and stock or stock options, and the total value of the package each year is usually around 2-3x the base salary.
For entry-level management positions, total compensation can be 3-5x base salary.
Experienced traders can expect bonuses of 20-30% of their total compensation, depending on their performance strength and the overall profitability level at their trading desk. Sophisticated sales traders may receive stock or equity as part of an annual bonus package of 30-50% of their total compensation.
5. Job Outlook
Unemployment rates for financial professionals are low, with only around 2% of jobs being lost between 2008 and 2013. This is due to the cyclical nature of this industry – as GDP goes up, so does volatility – and the large overall size of investment banking firms worldwide.
Entry-level hiring in this industry is very competitive. Hiring at many firms is down from prior years, and there are always more qualified candidates than open positions. In addition, some companies have policies of not hiring entry-level people who do not already have some experience in the finance industry.
6. Advancement Opportunities
Entry-level traders can typically expect to move up to more senior sales trader positions with additional responsibilities after 6-18 months. Experienced traders can move into portfolio management, equity research, or investment banking positions.
Management level employees may be promoted to head of trading for a specific product, such as commodities or derivatives. They may also transition to broader areas like market risk management. Some independent traders act as external brokers for the firm, trading their own money with the assistance of company capital.
7. What Are the Benefits of Being a Trader?
Traders typically work regular hours during market hours and then do additional research outside the office. While it is possible to call or take client phone calls after working hours, this does not happen very often.
In general, traders have a high degree of autonomy over their schedules and daily activities. Most trading floors have a casual dress code and provide healthy lunches to employees. Many firms also provide in-house fitness facilities and onsite childcare for their employees.
There are also potential opportunities to travel, both domestically and internationally.
8. What Are the Possible Drawbacks of Being a Trader?
Traders spend most of their time front of computer screens, making decisions based on numbers. While some interpersonal skills are required, it is typically considered more of an “individual sport” than other finance jobs such as investment banking.
Traders also work under pressure, which can cause stress-related health problems. Additionally, many firms expect traders to handle their expenses, meaning they must pay for travel and entertainment out of pocket.
9. Salary Negotiation
Entry-level traders typically do not have much leverage when negotiating salary, as many qualified candidates would be happy to take the job at that pay level. Experienced traders who feel underpaid relative to market standards may try to negotiate a higher base salary. It is best to be prepared with a list of competing offers and the compensation for each position in this situation.
Entry-level traders who do not receive a sign-on bonus equivalent to 30% of their first year’s base salary may also consider negotiating a higher signing bonus or additional stock options.
10. What Kind of Companies Do Traders Work for?
Traders typically work for large investment banks, hedge funds, or proprietary trading firms.
In investment banking, traders may trade stocks and options on a product team that works with a specific industry or company. They also analyze the market and offer advice to the client about both buying and selling securities.
At some firms, traders are also responsible for hedging the risk taken by the client.
Hedge fund traders often work at smaller shops responsible for their capital. They may also work at larger firms that manage a pool of money from many investors, known as a fund of funds.
Proprietary trading firms have a different structure than banks and hedge funds. Traders typically work on a team and trade for the firm, not themselves.
Some of the top recruiting companies for traders are
- UBS (http://www.ubs.com/careers/graduate/)
- J.P. Morgan (http://www.jpmorgancareers.com/)
- Goldman Sachs (https://careers.goldmansachs.com/)
- Deutsche Bank ( http://www2.db.com/careers/default.aspx?MenuID=Careers&sChannelid=CAREERS_HOME)
- Morgan Stanley (https://www.morganstanley.com/)
- Citigroup (http://www2.citigroup.com/citi/content/workingatciti/studentsandgrads/index.htm?WT.svl=Footer)
- Barclays Capital (https://careers.barclayscapital.com/)
11. Best Colleges to Study Sales and Trading
- Wharton School, University of Pennsylvania (https://wharton.upenn.edu/study/undergraduate-admissions/mba/)Leonard N. Stern School of Business, New York University (http://www.stern.nyu.edu/programs-of-study/fulltimemba/)
- School of Management and Labor Relations, Rutgers University (http://smlr.rutgers.edu/prospective-students/undergraduate/)
- The New School (http://www.newschool.edu/nss)
- Tepper School of Business, Carnegie Mellon University (https://www2.soba.cmu.edu/prospective-students/)
- Gabrielle School of Business, Ford ham University (https://gabelli.fordham.edu/academics/undergraduate-programs)
- Dyson College of Arts and Sciences, Cornell University (http://www.dyson.cornell.edu/)
Sales and trading careers are often high-paying, with average salaries around $62K. Salespeople work to make a sale by identifying the needs of their customers and finding ways to match those needs with available products or services. Traders use knowledge of financial markets to purchase stocks, bonds, currencies, commodities, etc., in an attempt to earn money on market price fluctuations. If you’re looking for a career that has room for growth and opportunity–and one where you’ll be able to interact with people from different backgrounds every day–a sales or trading position may be just what you need!