Sales & Trading Analyst
Multiple monitors, graphs, stock tickers, and rows of people sitting next to each other with no discretion… Welcome to sales and trading. This is probably the section of the bank that is closest to what people describe as Wall Street. This fast-paced environment is completely opposite from what you will find in investment banking or research.
It is very difficult to generalize S&T because it has so many different positions that even people who work in the bank don’t know about. S&T generally splits into fixed income, commodities, currencies, and equities. Each of these positions is very different from each other, meaning that if you were to transfer to another position, you probably wouldn’t know what’s going on for a few weeks. However, there are some things that all sales people and traders have in common. Just remember that everything that is desk-specific can be learned at the desk.
First of all, why do we call this sales and trading? Because there are sales people and traders. As a sales person, you will be in touch with your clients and try to facilitate the trades. Once the sales person got in touch with the client, it will try to coordinate the trade with the trader. The trader will then either buy or sell the security (take a position), and try to mitigate (avoid) the risk as best as possible.
One common misconception about trading is that people think traders make money by buying low and selling high. This is not true. This happens on the buy side. On the sell side of the business, traders are market makers, meaning that almost all the time they have to take positions that will cost them money.
What does market-making mean? It means that the trader has to take the position in a certain security in order to facilitate trading of that security. In order to be a successful market maker, the S&T people have to be great risk managers. They have to understand how the market is moving and what price they can offer. If you have ever heard of a bid and ask price, this is what traders do all the time. They have to quote a price at which they are willing to buy (bid price) a security, and at which they’re willing to sell (ask price) a particular security.
You might be asking yourself, “If they’re losing money in those trades, how do they make money?” From commissions. Let’s say that Fidelity (a big mutual fund) calls and wants to buy 10 million shares of company XYZ for $10.00. This stock is probably priced higher in the market, let’s say $10.02. Even though the trader would lose money by selling it for the lower price, it has to do it in order to keep money moving in the market. However, this is not all that bad for the trader. The trader will get paid a fixed commission per share, let’s say 3 cents per share. So by making this trade with Fidelity, the trader will earn $300,000 for sure. Now the only thing that the trader has to make sure to do is to lose less money by making the transaction than what he/she gets paid in commissions. The trader will have to “work” those 10 million shares and try to get the best price for them in the market and then sell them to Fidelity. Rarely are securities traded in extremely big blocks.
After being in the business for a while, you can expect to develop a very strong sense for the market. In addition to that, you will learn a lot from previous mistakes and hopefully apply those lessons in the future. This should make you more rational and a better risk manager. Being able to manage your positions will be a crucial skill that you will acquire. Additionally, with so much technology and information available, it is sometimes hard to know and focus on important things. As a S&T analyst, you will learn what news drives your industry and become very good at distinguishing what’s really important and what’s only nice to know.
Unlike investment bankers, S&T people usually stay within their business until they retire. The skill set they acquire is very specific to what they do, and it is hard to find a better job outside of the industry where they could apply it. For that reason, if you start as a S&T analyst, there’s a good chance you are going to do it for the rest of your life (or you’ll have to start over in some other industry). However, you might move in between the buy- and sell-side. Many analysts end up going to the buy-side and get involved with mutual funds or hedge funds.
Although there is no typical career path for any career, if you become a S&T analyst, it is likely that you will not get your MBA. It is seen as a waste of money and time, because what you learn is not necessarily transferrable to your job. Additionally, you might move between different companies or change your position slightly, but in the end, you will do a similar job until you retire (which might come early if you’re good at what you do).
S&T analysts have to wake up early every morning and make it to the office by 6am, but they also leave earlier than anyone else in the industry, which is around 6pm. Also, S&T people rarely work on the weekends. If the market is closed, there’s not much to work on besides do some research or prepare for the Monday morning meetings.
Another perk of being a S&T analyst is all the outings you go to with your clients. You get to spend firm’s money to entertain your client and establish relationships. This includes (but is not limited to) going to baseball and football games, and many bars and restaurants, all for free. However, many S&T professionals will tell you that they’d rather get a good night sleep than party with the client till after midnight and then still have to show up in the office by 6am.
Just like in investment banking, compensation is great. You’ll get a similar breakdown of your pay, including signing bonus, base salary, and year-end bonus. However, the year-end bonus in S&T might be lower in the beginning than the bankers’ bonus. You shouldn’t worry about this, because if you’re a rock star, you’ll start getting paid a lot very early in your career. While the banking career is very structured, in S&T you eat what you kill. And if you can kill a lot early on, you’ll eat a lot as well – much more than bankers of the same age. In statistics terms, S&T career has a higher standard deviation of getting paid. Again, here’s the breakdown of what you can expect as a first year analyst:
- Signing bonus: ~$10,000
- Base salary: ~$70,000 – $90,000
- Year-end bonus: ~$10,000 – $40,000
Although these are pretty fair ranges to assume, it is hard to generalize and encompass what every bank pays, so use this only as guidance.