The first thing you need to know is that sales or trading careers are often ends in themselves. If you start as a trader, you might simply go on to become…a trader.
In sales and trading, there’s no clearly defined path up the analyst, associate, vice president, managing director hierarchy of the kind you find in the investment banking division (IBD). Yes, you might get those job titles but the actual job you’re doing might not change. As a top trader, you won’t necessarily manage people. Even the best traders in investment banks aren’t big players at an organizational level. “Top traders are often some of the best paid people in investment banks,” says David Hesketh,an ex-Merrill Lynch structured products trader who now runs Trading Hub,a trading game and simulator, “But unlike the CEO or CFO, no one knows their names.”
Even so, there is an established sequence of jobs at the start of a trading career. It’s usual for junior traders to start as desk assistants, says Hesketh. At worst, this means being a general dogsbody for the trading desk (fetching coffee/lunch/donuts etc). At best, this means working with spreadsheets monitoring the profits and losses of traders on the desk, using financial models to analyse how prices of the products traded by the desk might change, and making sure all trades are properly entered onto the bank’s system. Being a desk assistant can be pretty administrative, but it’s also a great way to get to know how a particular group of financial products work, and how they’re traded.
Not all desk assistants go on to become traders. However, if you start out on a bank’s graduate training program, you have a good chance of doing so. The evolution of your trading career will then depend partly upon the products you trade, partly upon the way in which you trade them. “There are many different angles and avenues in trading,” points out trading coach and former Credit Suisse rates and FX trader Steven Goldstein. “You could be working with vanilla products (simple cash equities or bonds) or complex products (derivatives). You could be working with an electronic trading system which executes trades for you, or you could be executing trades yourself.” Trading careers are also about trading ‘style’: “You could be trading on the basis of qualitative analysis, or you could be building quantitative models that determine when a trade is placed,” says Goldstein.
Hesketh worked as a structured products trader. In this area of the market, he says career progression is reflected by the opportunity to place more complex trades and to work with structurers to build solutions for clients.
As a rule of thumb, whichever area of trading you go into, the longer you survive and the more you’re able to prove your ability to come up with trade ideas (or hedging ideas) that generate profits, the more risk you’ll be allowed to take on by your employer. However, you’ll need to prove yourself from the start.
“If you work in trading, the typical career involves a steep learning curve with strong development in the first three to five years,“ says Goldstein. “After that, things tend to flatten out as people mature.”
At worse, trading careers can be a bit like the careers of elite sports professionals – high octane for a decade (or less), before tipping over into dereliction and decline. The best traders from investment banks have traditionally gone into hedge funds, but this is getting harder as hedge funds are simply hiring other traders from hedge funds instead of plundering banks for their talent. Some top traders – like Isabelle Ealet at Goldman Sachs or Steve Ashley at Nomura do go on to assume major roles running the whole trading business. The most well known ex-trader is Lloyd Blankfein, CEO of Goldman Sachs.
By comparison, if you go into sales, your career progress will be all about clients. Salespeople in investment banks live and die by their ability to find and keep clients and to encourage those clients to place trades through their employer. The more senior you are, the bigger your client base will be. Sometimes, big name clients will be assigned to you simply because you’re senior. Other times, you’ll need to unearth these clients yourself.
Like traders, salespeople in investment banks are being affected by the automation of the trading process. When investors and clients can place trades themselves through electronic ‘direct market access’ systems, there’s no need for a salesperson to talk to them about market developments and encourage them to trade. For this reason, banks like Deutsche Bank no longer use salespeople to cover all their clients. In Europe, so-called ‘low touch’ clients at Deutsche are now dealt with by traders working on electronic systems in the bank’s Birmingham UK office and only ‘high value’ clients (usually hedge funds), get regular calls from the bank’s salespeople.
In future, it’s likely that the sales profession will therefore polarize: on one hand you’ll have elite salespeople talking regularly to sophisticated hedge fund clients who trade regularly and generate big fees for the bank. On the other, you’ll have salespeople who talk to less important clients and persuade them on the merits of using the bank’s electronic system rather than relying on constant human interaction. If you work in sales, you need to decide which side of the divide you want to specialize in from the outset.