If you have followed the news over the last years, you will have heard about the collapse of Lehman Brothers, exploding government debt in the US and Europe, the skyrocketing gold price (and its sharp decline, in recent weeks), volatile currencies, booming shares of technology companies, the rise of China, the possible bankruptcy of Greece and rogue traders Jerome Kerviel of Societe General and Kweku Adoboli of UBS. Careers in sales and trading are about as fast-paced and volatile as these events suggest, and I am painfully aware that I will need to keep updating this section very often, because what you get paid, what you do and what your prospects are can change quickly in the markets.
Is it for you?
The best indicator if a career in the global markets is for you is if – surprise surprise – you are interested in financial markets and economics. You will follow the markets all day, so you need to be interested in how prices move and why. Are you watching oil prices, equity markets, home prices, unemployment news, currency movements? Do you wonder where they will go and why? With this as a prerequisite, there are several traits that are essential in the markets – if you have them, you can do really well, if you don’t, it will be hard for you to survive. You need to be…
Am I making it sound horrible? I hope not. It really depends on your personality. The first time I walked on a trading floor of a large investment bank in London, I immediately loved it. It was buzzing and exciting and I thought “I want to be part fo this”. I have met others who felt overwhelmed and thought “this is a terrible environment” or “it’s so loud” or “don’t people have offices?”. Try visiting a trading floor on a busy day, like a Monday morning or Friday noon and see how you feel.
There are slightly quieter jobs within the markets such as structuring and equity research, but even those will be more fast-paced and interactive than any other office job you might be thinking of.
The $$$ factor
The media (particularly in the UK!) doesn’t stop discussing bankers’ pay, so you may know already that traders earn a lot of money. If you want to earn a lot of money fast, working in sales and trading is probably one of your best routes. But that doesn’t mean anybody who starts will be a millionaire in a couple of years time, so let me give you a more realistic expectation.
Bankers in sales, trading and structuring used to have a good base salary of about $60,000 at the analyst level and $90,ooo at the associate level, which was a very good starting salary for graduates but slightly less than what those classmates going to consulting or corporate law would earn. The important part of bankers’ pay was the famous bonus, which could be as low as $10,000 – 20,000 in the first year, but could quickly move up to 100 – 300% of base salary after a couple of years.
The current situation is that, due to increased regulation and scrutiny of bonuses, base salaries have been raised considerably so that you can be paid a base of about $140,000 straight out of graduate school, but in turn bonuses are lower and come with more strings attached. Let’s say you are a high performing associate on successful trading desk, you could get a base of $140,000 and a bonus of $200,000 on top of that. But only about $100,000 would be paid out in cash, with the rest given to you in deferred compensation, usually in shares in your bank. This part of the bonus is tied to your job, and if you quit your job, you lose your deferred compensation. Also, if your bank’s share price goes down 50% (which my bank’s share price certainly has!), the $100,000 you thought you had in deferred comp is now worth only $50,000. If your bank goes bankrupt, that part of the bonus is worth zero.
How to manage your bonus will be enough material for ten blog posts, so I won’t go into it here, but let me just warn you that a lot of bankers don’t understand the uncertainty and volatility of their bonus and spend it before they have the cash. Don’t be tempted to spend like crazy and live the highlife thinking “I am earning $400,000″, because in terms of cash you have only half of that, and after taxes (particularly in London), it’s more like a quarter. It’s still great, but even with that it will take you more than 5 years to become a millionaire, and current trends in taxation and bonus regulation suggest it will soon be more like ten years, if at all.
Another point to add before I stop is that you shouldn’t take this salary and assume you will be earning this for the next ten years. One reason pay is high is also that it is a high risk career. You can get paid a lot one year and nothing the next, and because of market cycles, every three years or so a big firing wave hits the trading floors (I started my trading career the day Lehman went bankrupt, so I could write a whole book about it) and I think we are just about to see another one now, and unlike other finance jobs, sales & trading skills are not well transferrable to other jobs, so you always need to keep in mind that you might only be in the game for about years. Of my peer group starting out as associates in 2008, I think at least half if not more are already gone, some voluntarily, some let go, so keep this in mind before you think you have hit the jackpot when you start your job.
Lifestyle and the lady factor
I think of all the high paying jobs out there (leaving entrepreneurship aside), sales and trading offers the best lifestyle. You do work 10-12 hours every day, but since you are likely to start early around 7am, you can generally leave by 6 or 7pm at the latest and will always have your evenings as well as your weekends free. There can be some travel especially as you move up, but it’s not a lot. If you are in flow sales, most of your clients will be in London, some in New York that you might visit every other months or so. If you have corporate customers spread around, you might travel a bit more, but it is usually nothing like the travel you would face in consulting. There are some desks with slightly different hours, especially structuring and research where you might work longer hours (long on the trading floor would be to work till 9 or 10pm), but it’s still considerably better than on the mergers & acquisitions side.
As to the atmosphere, as long as you are okay with the fast pace and activity, I think you will find it fun. There is a lot of interaction on the trading floor, since there are no offices you keep bumping into people you know, people walk around and talk all the time, and there is always action, so you can have a lot of fun. It does depend on your desk though, you just need to be sure you work with nice people. I have always been lucky on all the different desks I worked with, but I do know there are some divisions with less pleasant people, as everywhere. I think that’s not part of the job though, it happens in every job, so you just need to watch out for it. The good part is that with high turnover, people leave and others start all the time, so if you don’t like someone, statistically speaking you can expect them to be gone two years later .
Lastly, I need to address what it’s like for women on the trading floor, since you might know that the share of women in trading is very low. Overall in sales and trading, I would think in New York and London the share of women is about 20-30%, and I think it is somewhat higher in Asia (especially in Singapore and Hong Kong, maybe less so in Tokyo). I have even heard that in some Emerging Markets like Turkey women can make up more than 50% of traders. It is more common for female graduates to join sales, research or structuring desks than trading desks, so the share of women on trading desk is more like 10%. I have observed that is by choice though, almost none of the female graduates try to get on the trading desk, maybe because they are worried about being the first one. I definitely encourage more women to try to become traders, but so far not many try.
As to sexism or discrimination, I haven’t encountered any. Working with lots of men, of course I have sometimes heard a few stupid coments (not personal ones, but examples could be one guy saying the credit crisis is to be blamed on women because they were the ones urging their husbands to buy fancy houses in London or another guy saying his daughter got into the top London private school and joking that it was such a waste of money because she was a girl – comments that upset me but it’s not exactly something you are going to call the police about). You will have colleagues with opinions you don’t share in any place, so even though I have heard some annoying comments (at the rate of perhaps three per year), I would definitely say in general it’s a very good environment for women.
Once you have children, it gets trickier because you do work 10-12 hours. You can see your children every evening and weekend, but it’s not like a 9-5 job, but then I think no high paid job ever is, so as high paid jobs go, I think this is one of the most family friendly you could think of.
How to get in
Due to its popularity in the last 5 years, there are less and less unusual paths into a sales and trading job, and I would say 95% of people get their jobs through summer internships that they convert into full time offers. To get an interview, you need to go to a top university in your country (banks usually only recruit from a small number of elite universities), have excellent grades (you should be at least in the top 20% of your class) and especially at the analyst level, it is now so competitive you best have some prizes or scholarships to show. If you’re an MBA at a top business school, the academic requirement might be slightly lower than for analyst, but in turn you will be expected to know much more about finance and the markets.
A lot of people in sales and trading do have a maths/engineering/physics degree, but it is by no means a requirement. You can get in with a international relations or economics or psychology degree just as well, as long as you can convince your interviewer that you want to be on the trading floor. To pass the interview, read my list of sales & trading interview questions and also have a look at my sales and trading interview reading list.
Your best way in is to get a summer internship and convert it into a full-time offer. It is much harder to get a full-time offer directly because most banks fill up their class from the previous year’s summer interns, so they don’t usually interview further after the summer (the reasoning being that only those who couldn’t find a internship or were turned down by other banks in their interships would still be looking). You might have a job at the smaller banks with a less standardised recruiting scheme though, as they do hire straight to specific desks rather than running a graduate scheme. Examples would be smaller European banks in London or local banks in Emerging Markets that hire graduates to specific desks.
You may have heard of some people getting to the front office after starting of in a middle office support role (such as credit risk officer or controller). This does happen occasionally, but it is very very rare and I think every year it happens less. So if you intend to get to the front office, definitely don’t start out in a support role, hoping to move over shortly after, it’s uncommon. If you can’t get a job straight out of undergrad, you will be much better off going into a related job in finance (working in asset management or insurance sales, for example) and then doing an MBA at a business school that is very strong in finance, such as the University of Chicago, Wharton, MIT, or the London Business School, or the masters in computational finance at Carnegie Mellon.