Jul 14, 2011

Know your post MBA Career: Sales and Trading

What is Sales & Trading (S&T) …. in plain language?
Securities Sales & Trading is where the rubber meets the road in the investment banking industry. An investment bank relies on its sales department to sell bonds or shares of stock in companies it underwrites. Investors who want to buy or sell a certain stock or bond will place an order with a broker or sales representative, who writes the ticket for the order. The trader makes the trade.

Individuals working in S&T department of an investment bank are not investment bankers, nor do they work in investment banking. Instead, they are either sales brokers or traders who work in sales & trading.

What do sales people do?

Salespeople are called brokers or dealers. They call clients from the moment the financial markets open until the moment they close, as well as for several hours before and after. Clients might be savvy high-net-worth individuals, pension fund managers, other institutional investors or corporate finance directors. Ultimately, salespeople take orders for financial products and communicate them to their trading desks for execution.
As one of them, you're expected to build a "book" of clients. No matter how long you've been working, and no matter how many clients you have, you're expected to cold call. New brokers make as many as 600 cold calls a day. Most of the work takes place over the telephone: soliciting clients or selling a particular stock or bond issue. You'll use analyst research and every sales trick in the book to push your securities to investors.

Day in the life of a sales broker
The salesperson's day begins early. Most arrive at 7 a.m. having already read the morning papers. Each day a package of research is delivered to the salesperson's chair, so reading and skimming these reports begins immediately. The morning meeting at 7:30 involves research commentaries and new developments from research analysts. The trading meeting usually begins 20 minutes later, with updates on trading positions and possible bargains for salespeople to pitch.

At 8 a.m., the salesperson picks up the phone. Calls initially go to the most important of clients, or the bigger clients wishing to get a market overview before trading begins. Some morning calls involve buy or sell ideas, while others involve market updates and stock expectations. At 9:30, the markets open for business, and salespeople continue to call clients, scrutinize the market, and especially look for trading ideas throughout the day. Lunchtime is less critical to the salesperson than the trader, although most tend to eat on their desk on the floor. The afternoon often involves more contacting buy-siders regarding trade ideas, as new updates arrive by the minute from research.

The market closes abruptly after 4:00 p.m. By 4:01, many salespeople have fled the building but not all. Many say the couple of hours between the close and when clients start heading for home are the best time to discuss strategies in detail. After that, there are the dinners and entertainment with clients that can stretch well into the evening hours.

.. and Trading people?

Traders make money by trading securities. Although they're the ones who transact trades for the brokers and their clients, traders are primarily responsible for taking a position in a security issue and buying or selling large amounts of stocks or bonds using an employer's (or their own) capital. When they bet right, they win big; when they bet wrong, they lose big.

Day in the life of a Trader
If you work as a trader, you'll have to be at your desk before the markets open. You'll spend the rest of the day sitting before an array of computer screens in the company of scores of other traders on the trading floor. The screens are a window into the financial markets, showing movements in the prices of stocks, bonds, commodities and other financial products, as well as real-time news and research reports. At the touch of a button, traders can buy and sell the products whose prices they're tracking.
How trading desks make money - and how they make hiring decisions - differs with each financial product. In recent years, trading of fixed income products, derivatives, energy and physical commodities like metals has been booming. On the other hand, the ranks of equity traders are being reduced as their jobs are replaced by electronic systems that trade more quickly and efficiently.

What are different career tracks in S&T?

If you are a sales representative, your career track will consist of building your business, or book, until you have a substantial number of clients for whom you trade. If you're a trader, your career track will consist of trading financial instruments (stocks, bonds, and other securities). As with securities sales, the job of the trader doesn't change over time; traders get sharper, develop better instincts, and benefit from experience as they go along. Due to the pressure of the career, few last to middle age.
  • Securities Sales Representative (Broker) : They act as intermediaries between buyers and sellers, and they make money off of commissions. In some cases, such as when trading stocks, bonds, and options, they need to be registered as agents of an investment house. Brokers give advice to customers and then make deals happen. Usually they specialize in a particular type of security, such as futures, options, or bonds. Brokers are sometimes called dealers, investment advisers, investment counselors, or investment representatives, but the work is the same.
  • Branch Manager : Senior sales representatives who have proven themselves on the trading floor may become branch managers. Branch managers hire salespeople, fire those who don't do well, and make sure that brokers meet sales and revenue targets. While branch managers make additional income in the form of commission overrides (a percentage of the commissions made by the brokers working under them), they're responsible not just for their sales, but their office totals.
  • Floor Trader : Floor traders run around the floor of an exchange (e.g., the NYSE), swapping tickets and making trades. Floor traders are responsible for locating the buyers and connecting them with the sellers (or connecting the sellers with the buyers). As prices change quickly in a turbulent market, traders are under constant pressure to get deals executed at the prices their clients (or their employers) specify. If a trader can't find somebody to buy or sell at a specified price, the buy or sell order won't go through, and nobody profits-not the buyer, not the seller, and not the trader (or the trader's employer)-because there's no commission. Traders work during an exchange's hours of operation, usually without breaks. They are slowly giving way to Desk traders.
  • Desk Trader : NASDAQ is what might be called a virtual stock exchange, as there is no physical building where traders meet to make deals with each other. Brokers have a "NASDAQ desk," which means they can trade on NASDAQ. That desk is actually a bank of traders, all staring intently at their computer screens to see how the market is shaping up, speaking into several phones at once in a mad rush to find buyers or sellers whom brokers or online investors have requested. (Trades made through an online account, such as at Charles Schwab or TD Waterhouse, go directly to the trader, bypassing the broker.)
Who Does Good in S&T?

Securities S&T is a high-pressure career. You're responsible for the financial fortunes of your clients-or yourself, if you're a lone trader. Every day you're making $100,000 (or more) decisions under severe time constraints. The daily fluctuations of stock prices can make you rich one day and break you the next. Brokers eat a lot of antacid.

Securities salespeople and traders work independently, usually with little supervision and very little interaction with management-provided they succeed. If they don't, they're quickly out of a job. To do well, you need a good head for numbers and a hidebound determination to make money.

If you're on the sales side, you'll need exceptional customer service skills; if you're a trader, you'll need to be able to handle huge risk-and stomach huge losses. The upside of these careers is the money brokers can make. Successful salespeople and traders can get very rich. Other valued skills:
- Outgoing and self-confident
- Ability to grow and maintain client relationships
- Excellent communication skills
- Ability to understand complex products
- Passionate about financial markets
- Can function well under pressure
- Self-confidence
- Comfortable with numbers
- Ability to think on your feet and react quickly to changing market conditions

Professional Certifications

There are no hard and fast educational or professional prerequisites for selling securities. However, the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC) require brokers to get licenses, depending on a particular broker's role:
  • You'll need to pass the Series 7 General Security Sales License Exam to sell most types of securities. 
  • Individuals who wish to sell commodities or futures contracts must pass the Series 3 Exam.
  • Most brokers also need to pass a Series 63 License Exam, dealing with state laws regarding securities sales. 
  • Managers need the Series 8 License for general sales supervisors in order to manage branch activities. 
  • Managers supervising options sales personnel or compliance need to pass the Series 4 License Exam.


People entering the field from banking or other financial industries may be able to command a guaranteed base, but in general you will succeed or fail based on your performance. The good news is that your income potential is truly unlimited: The more you work, the more money you will make.

Salary range: $40,000, with a $5,000-plus signing bonus for undergrads; MBAs start at $85,000-95,000, with a signing bonus of up to $30,000. Year-end bonuses fluctuate; they can be as high as 80 to 100 percent of base pay. Compensation in securities S&T is almost always based on commissions.

Exit Opportunities

So now you might be wondering, “Ok, so it sounds like a lot of this is repetitive and like you do a lot of grunt work as a junior trader – surely, the exit opportunities must be better, right?”
Unlike investment banking, where you could go into a wide range of different fields afterward – private equity, hedge funds, venture capital, corporate development, or something completely different, in trading, though, you only have 2 options: stay in trading (a similar “up or out” structure exists as in banking), or move to a hedge fund / prop trading firm.
That’s because the skill set you develop is so specialized – valuing companies and performing due diligence is useful in a lot of different fields, but knowing how to trade CDOs would be completely useless at a startup or venture capital firm.
with inputs from Wetfeet.com, efinancialcareers.com, mergersandinquisitions.com, umich.edu

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1 comment:

  1. There are really a lot of good career opportunities with good compensation in this kind of industry. What most people really do is pass series 7 or 63 exam to make sure that they get the best company hire them since most companies are looking for this as requirement from applications (licenses).