How underpaid am I? If at all.

I'm halfway through my second year on a FI trade desk. The way comp works for the traders is a base salary and then 50% of the profit generated from S&T activities. This is also in a HCOL city. Just curious if this is to be expected while still being developed on the desk and being into the second year.


Base: $65k

Bonus: $5k


I'm licensed with my 7, 57, & 63


 

Hey - I mean I'm sure you don't need anyone to tell you that you're very underpaid.

I'm currently in a similar spot as you (though not as bad) where I'm in a MCOL (started last fall) and got no signing, paid $75k base, $5k bonus in a S&T type role at a commission based shop (and I had to argue for that). 

I have mid - senior level contacts at some of the bulges so my plan is to keep in touch with them and also am taking level 1 in May so by the time 2025 comes around I'll be in a good spot to recruit.

 

I pretty much figured, but had been told to expect it going in because "the opportunity for earnings is so high". So, I wasn't blindsided. But the growth hasn't been quite there and I get a little frustrated seeing friends and others making more doing less (stress, hours, professional licenses). I'm not working a crazy amount of hours 50-60max, but it's 10hrs straight every weekday and a 6am in office start. Pay just doesn't justify it right now.

Similar to you. I have doors into other places but they aren't quite the same front office type role like what I have now is. But, financially, I'd definitely be better off. Contemplated taking the CFA, but don't know if the time spent on that could be better utilized elsewhere in my circumstance. 

 

70k is not a lot for a FO job in an expensive city for sure although a 50% cut is definitely on the higher end. Am I understanding correctly that you are generating something like 10k revenue and then getting 5k bonus from that? Are you contributing to the desk in ways that aren't captured by this revenue number? Is there an expectation/possibility that you will generate substantially more revenue soon?

My honest impression is that most firms with this sort of compensation structure are not very well regarded and I think you would likely get a significant comp increase if you can land a similar job at a better regarded firm although it seems like you may not have a lot of leverage to immediately get more comp at your current firm or even at similar firms without generating more revenue. 

 

Appreciate the response and happy to clarify more.

Initially came on to the desk as an unlicensed junior. Within the first 2 months, I got my SIE, 7, & 63. Several months later, I took it upon myself to get the 57 because only one other trader has it and it's needed if we are going to trade any convertibles. But it wasn't a requirement for the desk. 

For my role, it's a lot of the background stuff. Cleaning the office, making sure everything is organized and operating smoothly, supply orders for anything and everything needed, lunch/errand runner. I'm also in charge of our hedges and maintain an internal model to track and update all our hedged positions. I currently do not take on any risk or do trades with clients. There is no book for me to inherit or become a part of. Initially it was told to me to start cold calling and building a book of accounts. Tbh, if I were building a junior up, I'd probably have made sure they were a little more well versed on the jargon and nuance of the industry before throwing them out to cold call PMs. 

The bonus is separate from the profit generated as well. I'm not sure how our company split the bonus pool or determined who receives what. But, the amount traders are paid the cut of their profits on a monthly basis on top of their base salary. I know with a very high confidence interval that the lowest paid one is well clearing 5x my salary. 

I feel stuck at the current spot. Primarily because I do see the money and success that is had from the traders here. But they did bring client relationship from a previous firm. Because this is my first stint on a trade desk, I was curious if this type of upbringing is typical or if there are more corporate structures in place to help with development or things I can be doing to advance. It's a frustrating situation and while I am extremely grateful for the opportunity, at some point gratitude subsides to finances when I keep dipping into savings to afford the role itself.

To answer some of the other questions you had. There is an eventual expectation that I am helping contribute to the overall revenue of the desk. I don't think there is a hard deadline for when that is to occur, but I also am not just going to go rogue and start trading on anything without strict permission and guidance. I'm not sure if you could account for me doing a lot of the background things as helping with the profit generated. I know that it helps keep the traders operating at their best and they always have what they need and don't have to step away from their screens. And I do agree that this comp structure isn't very well regarded, especially as a junior. I think, if you are well established with strong relationships and constant flow, it's a great thing to have because you get a $25k check if you do a $50k trade (excluding taxes coming out). But it comes with the risks of having a down month and making peanuts. For a senior moving size, absolutely understand why they want it. For a junior still getting their feet wet, definitely see why it's not.

 

You gotta get out of there, this is not at all set up for a junior person to develop at all and you are being given an impossible task.  That is a place you can come back to after you have spent 10-15 years at BB building relationships and building skills.  Places like this exist all over the financial services industry they have a good model for senior people and need junior people to do the grunt work and have no plan to develop them.  You got what you can out of this place and its time to move on.  With your licenses and experience you are good junior hire for almost any markets based client facing role in finance and they all pay more than what you are making now.  Bonuses and deferred comp will start to hit bank accounts at most places over the next couple of weeks get out there and start talking to people.  Does not have to be in S&T, any role in finance that requires licenses and some basic understanding of the markets you are a great fit for.  I'd look at sales jobs in asset management, private banking, etc.  Keep talking to people and throw your resume in on job boards for stuff that might fit.      

 

I really appreciate the insight. I agree with you completely that it feels like an impossible task, but I don't want to sound like I'm complaining or not giving it the best shot possible. The desk is relatively newer and they all brought over previous relationships. I am the first junior hire and the only one with no previous trading history.

Honestly, I feel very conflicted at this current point. I see the potential and how successful the people on the desk are, so I know that it is 100% possible. The hard part is not really knowing if/when it will really come to fruition. After I got licensed, it became extremely hands off. The days pretty much blend together and there is a definite lack of structure. I think the hardest part is not really knowing what to do to be progressing myself forward. I'm always asking questions and looking for ways to be helping the other traders out, but that really hasn't yielded much improvement. And again, I don't want to sound ungrateful, I just feel extremely stuck with no way out. 

In your time in the industry, have you found that juniors are able to overcome these barriers and make successful careers out of similar places, or is it best advised to look for other places? Either buy-side or sell-side.

 

You don't come across as somebody who is complaining or not willing to work at all, think of this as an internship and you have learned what you can and now its time to move on.  You are a great junior hire for any BB/buyside firm looking for somebody they can throw into a junior role who knows enough of the basics (lingo, licenses, BBG) that can get up the curve much faster than somebody out of college.  A lot of firms out there are looking for people like you its just a question of finding them.  

The only way to possibly make this work at your current firm would be to ask to act in a sales only capacity, that way you could call on people and just market the experience of the desk and the flows the desk sees and how that could maybe help a client.  Your client buys or sells something you keep 25% the other 25% goes to the "trader" on the other side.  Even this is going to be very hard b/c but at least here so have a fighting chance of getting some traction and building some relationships. 

In terms of what you should be learning, you really should understand your desks role in the ecosystem.  What is your firm good at and why do various client types come to you with certain things?  When your traders take risk, how any why are they taking it?  What are various client types doing and why? 

 

I seriously appreciate the response. It definitely does give the "internship" feeling given the stagnation as a junior for this length of time. We had an intern come on during their winter break and they will be brought on full time upon graduation. It seems like they want us to be more on the same level than have me on my way up to theirs. Which I find mildly annoying given I'll be 2 years on the desk at that point and they'll be 3 exams away from even having any use.

I can give the sales only approach a shot in the meantime. A big risk is that our most senior trader is very strict about who I even speak with and tends to grill me if I'm not getting pre-approval for every cold call I make. Which I found to be inefficient. And the only other mildly annoying aspect is that the majority of the desk does wfh every day. I'm not one to say whether people should be in office or not. But, I do find it hinders development when the people I am meant to be shadowing are always working from their homes and my only contact with them is through IB

I've done some brief looking around on career sites for banks and linkedin, as well as networking with any friends or colleagues to find if they have openings for junior roles. But, if there are any other suggestions you have that can help with searching, I'd love to hear them. I do really appreciate the insight you've given.

 
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Maybe I am a bit clueless but I struggle to see how a place set up this way with very limited balance sheet would be doing enough volume to need 2 junior people?  How many trades is the firm doing a day, and how many senior people are on your team?  At most BBs there are 2-3 juniors max and that would be for a large desk doing a lot of volume. 

You are getting a raw deal by not having everybody in the office daily, so much of this job is just the being in the environment and listening to conversations you can only get so much out of being in the persistent chats and tagging along to client events.  I'm sure you are already doing this but pointing out opportunities to the senior guys that they might miss is a good way to score some points.  Ex: Did you see bond A, but be a fit for client B they bought something similar yesterday.  Or hey this looks rich/cheap based on these comps.  This is what junior people at BBs will be doing when they first start in addition to all the grunt work for the desk they are on.  If something hits track it and put together an excel sheet with how much the trade made, will give you an idea if your ideas work and would give you some leverage to maybe get a bigger bonus when the time comes.  In a situation like this you need to advocate for yourself, ask the senior guys what you should be doing, try to set up time to talk to them monthly about what you can be doing.           

In terms of being efficient with cold calling, a couple of things I would think about

1. I would put together a large list of people you want to call get approval for all of them at once and work off that. 

2. If your firm does other products I would see if you can cross reference that list for clients that are doing business with the firm but not in your product (ex: the firm does MBS with that client but you do credit maybe you find the person who does credit there and call on them? Not applicable for every situation but I would imagine some opportunity there).   

3. I would also get this in writing as this place seems like they type that would screw you if were able to start getting something going and started making some money. 

In terms of networking, don't be afraid to reach out to people that you might have something in common with that are doing something you think might be interesting to learn more about it.  You are early in your career and just trying to learn more about what else is out there people will be willing to talk to you.  

 

I'm gonna be honest, any place that is paying 65k base and 50% of any trading profits sounds like a bucket shop. Most real dealers pay experienced traders somewhere in the neighborhood of 3-6% of their market making revenue and a base around 100k at least (for junior roles).

For context, I wouldn't be surprised if dealers at a bank with decent flow are making 100-250k per day, just on bid/offer (forget prop for a moment). That works out to about 30-60mm per year. They're not paying traders 15-30mm per year just to take bid/offer on franchise flow. 

You'd probably be better off at a prop shop or moving to a real dealer where you'd get some structured training.

 

I really appreciate the response and insight. I agree with you on a lot. I can assure you it's not a bucket shop, just a much smaller BD. It's also on the younger side, hence the pay structure being more unique that what's standard. I think the senior traders negotiated hard for the structure to be the way it is in order to come over and start this desk. 

It's a mixture of finding securities that we know our institutional clients will be interested in, making riskless trades from one account to another, or taking on some risk ourselves and seeing how the market goes. So a mix of being a broker dealer and being a prop trader. 

Is there more of a standard structure on training up a junior at BBs or larger BDs? Or is it advisable to also be looking at junior trader roles a buy-side shops that would be willing to develop someone with over a year's experience on an institutional desk?

 

No he's right, people in the industry sometimes calls a shop like yours a bucket shop, even though it doesn't meet the definition of what was once called a bucket shop 100 years ago. In today's usage, it generally refers to a smaller shop that has little or no balance sheet. It's not a clearly defined term, and generally is used in a pejorative way to talk about smaller shops that are perceived as less established and prestigious, but not necessarily illegitimate or illegal. Though the term could also apply to a firm that is unethical or illegal, I don't think it necessarily means that in practical common usage in a serious way, whereas calling a shop a boiler room generally implies some questionable practices.

At any rate, you work at a bucket shop, it's eat what you kill, and you can't kill anything because you don't know anyone, and can barely talk the talk. It's a pretty common situation. You can try to leverage your experience to get a junior front office role at a bigger shop. But if you found such an opportunity, I'm guessing we wouldn't be talking about this. I wouldn't take a middle office role at a bigger shop. Right now you have a seat, middle office puts you out of the game. So you gotta make the most of what you've got. Meet clients, pitch trades, get whatever help you can get, and don't be afraid to take risks within reason. You can't ask for more money, there's a long line behind you that will take that seat and give it their shot. And you can't wait forever to do something because you're wasting your time and will eventually get pushed out. So figure out how to do something that will make you stand out, and then either use it to get paid, or use it to get a job at a bigger shop.

 

Thank you so much for the response. That helps a lot. Your explanation makes a lot of sense and I appreciate it. You definitely nailed the desk's operation (small balance sheet and no prestige on the street. Just well established traders)

I've been doing a lot of research about other opportunities around and networking with a few firms I have friends at. Hoping that yields some results. I absolutely agree that I don't want to take a step backward into middle office territory. There is a ton of knowledge I've gain in my time on this desk, so really hoping that another firm (buy-side or sell-side) takes notice and gives me an opportunity to demonstrate it. 

 

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