Traders screwed?!?
I'm often concerned about my peers in the Sales & Trading career track. While many of them seem to think they will be the next big HF PM and such (and I am certain that a few of them will be) I have a hunch that the vast majority of them will be either unemployed within a couple of years or cut at a mid-level management role, either from poor performance, a bad mistake, and/or automation, and then have nowhere to go.
Does anyone have any insights on what happens to those who go into trading out of undergrad say 10-20 years out? Seems like a dead end for most since they would have built little to no transferable skills to enable them to change careers after they get fired
If you’re in FI S&T you’re good. Little to no automation on most desks. Bond traders kind of stick around forever though, so very difficult to move around as seat space is tough to come by.
That's because (it's widely known) that FI is about as exciting as a senior citizen on life support. In other words, it's VERY BORING and difficult to attract/retain ambitious talent.
Im assuming you just mean vanilla rates trading? What makes it more boring than other products for example?
FI trading ecompasses way more than just rates. You have Rates, Sovereigns, Corps, ABS, MBS, and Munis. And every desk has a high yield version of each. Wouldn’t take the comment above seriously, that guy couldn’t tell his head from his ass.
.
as a trader myself...this rings true in a very hurtful way. The exception is the superstar.
The superstar trader can make millions to billions...and will quickly eclipse most ibankers. Every person who goes into trading thinks THEY will be the next superstar. If you don't think you'll be the next superstar....then you don't belong in trading.
risk vs reward...ibanker is the statistically better job...but if you are playing for the extreme edge, then trading offers the gambler an opportunity that ibanker does not.
People are throwing ms at this post but having worked in S&T for a year before moving over to IB, all of that is pretty much true. I worked in equities, which has seen a lot of restructuring (& continues to see it moving forward) and those guys who got cut ended up in pretty rando sales gigs. Seeing that was a big factor behind my move to IB.
Like want2trade says above, a lot of sales & trading is banking on yourself and in the majority of cases, the gamble doesn't pay off especially in an era of rapid technological change that's shrinking rev pools and headcount.
You're saying you haven't heard of any traders that made more than 115k (85 base +30 bonus) this year??
its rare for a 1st year trader to make more than that...because most 1st year traders aren't actually trading...they sit next to a senior guy, do all the bitch work...and are paid to learn thru osmosis for the 1st year. Most 1st year traders lose money in their trading books (if they actually have their own book)...some make a little...but its VERY RARE for a 1st year trader to make significant money trading. Trading takes years to learn...and in the meantime, the job is to not lose money. Around year 3, BB traders are expected to start making real money.
This question has been asked in some form every other month since WSO started, and will be asked regularly until the heat death of the universe.
S&T used to be better hours, same base, better bonus upside, more fun/fratty/freewheeling, more quantitative/abstract/intellectual with regards to IB (like over 10 years ago).
Now, the hours have gotten worse, the base is lower than IBD, the bonus upside is gone because you can't take risk (and with MIFID II, in Europe, barely talk to clients), tons of compliance/watching your ass (fratty atmosphere is gone), more coding less finance, and yes, you're slowly being replaced by software, while your boss sees his retirement getting pushed further out with each disappointing bonus, and no longer even pretends to care about your career.
If you're on a good desk, and your skills match the desk perfectly, it can end up making more sense than Banking. Banking is also mired in regulations and is just as boring as ever (PPT formatting, typo-catching, save-as Pitch_v41, etc), but it hasn't deteriorated as much as S&T has.
The tables have definitely turned.
once you are in the BB trading biz for 3-4+ years, your base gets pegged around 120-200k (depending on the bank)...and it pretty much never goes up from there.
At a BB, as a trader, your bonus is between 4-6% of your P&L...which can vary from zero to infinity...as a trader, its up to YOU to make your P&L. Nobody else is responsible for your P&L.
A trader who makes 60 million dollars trading can get a 3mm bonus (this trader should go to a hedge fund to collect the 20% to get 12mm). This 60mm trader will almost always have multiple hedge funds to choose from. Its very rare for a BB trader to stay at the BB making that kid of money, because the hedge funds pay so much better. Its also very rare for BB trader to make that $$ in the first place...because trading is so incredibly hard (hence, why hedge funds pay so well).
20% for trader at hedge fund is only slighter higher than the market rate. It’s probably 17% on average. All multi-strats pay in that range.
Different if you are execution trader. But that is fairly standard at macro/multi strat. At the bigger prop groups 30-40 is standard ,
Honestly I’m not even sure what the difference is between multi-strat and a drw. Probably a slight difference between position building versus daytrading but they both do both.
When markets are doing hot, your EV is much higher because no one gets fired and the $ upside is massive. With regulations, technology etc, you are not gonna make as much money. The trade (i.e. doing S&T) doesn't look as attractive. We are never going back to the heyday.
HOWEVER, i gotta address some of the myths posted above regarding life as an analyst on the desk.
Hours: Except for some very specific desks, no one on the floor works 70hrs+, not on a regular basis anyway. For juniors, a 60hr work week (12hr/day) seems more like the norm.
Comp: You get paid if your bank/group/desk make $ and you perform. That's why with all the restructuring sh!t going on, some banks just don't pay their juniors anything. That's because they have a smaller bonus pool and they still gotta pay their material risk takers first. Comp also varies more between the top and bottom bucket than in IBD and it's not a standardised X% per bucket like in IBD. Basically you can get paid >100% and you can also get 0.
Not all seats in S&T are the same. It depends on the product, your bank's relative position within that market, your boss etc and the thing is most graduates just kinda luck into their seat/desk.
https://bit.ly/2HG3AuA?cc=b49fbbc671c10049f708ed0e2050c060</a">Goldman profit up 27 percent as trading surges. "Goldman reported gains in all four of its major business units, especially trading, as a surge in volatility led customers to transact more in capital markets."
Morgan Stanley reported all-time high profit (IB revenue climbs 7%, Trading revenue +21%)
You're alright folks.