Why choose Sales and Trading over Investment Banking?

I'm just going to give some perspective as someone who worked in S&T but pivoted over time and ended up in IBD and then HF. I will go into my personal decisions and career interests over time but also try and touch on what I see as the various paths in and throughout S&T and briefly discuss my perspectives on IBD. Hopefully this will be helpful in providing context and strategy.

My initial interest in S&T (like I'm sure many people on this site) was stoked in high school during the 2004-2007 financial services bubble where traders were getting paid hand over fist and the FICC arms of the bulge brackets were expanding at incredible rates and bringing in large sums of money for the banks. This has largely changed due to regulation post-crisis.

Side note: It's funny but when I was in college all of my peers were bearish on S&T due to automation but while automation poses some risks to the nature of the industry, I think they are further out in the future, vague, and difficult to really understand how it will affect various industries. You can't really make career moves based on those assumptions IMHO (unless you have real insight into the nature of disruption and in that case what are you doing? go work in VC). Regulation, however, is a very real thing that is capping the growth of these divisions.

These S&T divisions expanded at massive clips during the bubble period (I think I read somewhere that Lehman S&T 10x'd headcount between 2000-2008 or something?) and towards the tail end of that they hired a lot of kids coming out college that probably weren't the best recruits but managed to hang on and were in associate-director level positions by the time I started interning there. By then, the smartest traders and money makers had left the sellside due to the diminished revenue generation potential and a lot of the guys left just didn't really strike me as that impressive. I think this has slowly changed since 2013 as the deadweight has gotten fired and some smart junior-level hires have been made but I am no longer very plugged into the industry so I don't know.

Another factor that contributed to my decision to not pursue S&T was that my initial goal was to become a global macro PM but the path to get there is no longer as clear-cut as it was before. Prior to the crisis, the path was: you get to a bank -> prove yourself and hustle to get into a risk-taking seat -> hopefully do well -> if you want to leave to a hedge fund or raise capital (not a path taken by many since banks had essentially unlimited capital at the time), you can point directly to your track record. There is no more pure prop trading at the banks and any prop trading that does exist is mixed in well enough with flow trading as to be indistinguishable/defensible to regulators and you cannot point to that record when trying to move to a hedge fund. I also canvassed HR/"biz dev" at various multi-strategy hedge funds at the time to understand what the new path to hire junior talent was and there wasn't really any. (btw - shout out to Bondarb for giving me the context to understand this as a college junior, it is users like you that make this site so valuable) With central banks suppressing macro vol there was not much of a desire to hire any new macro pm's at the time and so multi-strat funds weren't too interested in figuring out a new talent pipeline. That might have changed in the last year as the Fed's balance sheet started to decline at the same time they were hiking and volatility returned but it might not have now that the Fed is spoonfeeding the markets. Am no longer plugged in so I don't know.

On a related note, I personally believe that if you really want to be a risk taker and not just a flow trader, there are not many avenues remaining to pursue that through S&T. Equities traders as a breed are dying out. HY seems to be the lone bright spot and I've seen candidates do 12-18 mo stints in credit research, spend time as a desk trader, and then move to a risk-taking position at a fund. Think that the HY market is unique due to relative illiquidity in that regard. I already discussed the career prospects of macro traders but again, that might be changing now. I will also note that it does seem that there is strong demand for derivatives traders across all asset classes on the buyside if you are good.

I frankly did not fully understand the value of a sales guy until I started working at an HF but good sales professionals do add real incremental value. They also have a phenomenal work/lifestyle balance. I will also note that many people don't fully appreciate the value of gaining sales skills early on in your career. That said, there are downsides to the S in S&T. Similar to all public markets roles - there is always the threat of getting cut if you don't perform. Additionally, there is a very real bias that you are pigeonholed as a sales guy even though it is your first job out of college. It will take real hustle if you are interested in breaking out into an unrelated role later. Personally, I also believe that most people can just pick up good sales skills themselves by reading books and implementing techniques but YMMV.

IBD - being an IBD analyst fucking blows. There is no real way to sugarcoat it. Every firm will sell you on "culture" and "hours" but it is all bullshit. Maybe the worst groups will work you on average a few hours more than the median but it will largely vary within banks based on which groups are sweatshops and will vary based on which deals you are staffed on. The one constant you can safely bet on is that you will not own your time during your stint in Investment Banking. The positive is that you will be forced to gain modeling skills but in this day and age you can largely teach yourself any modeling you ever need to know through SEC filings and Macabacus. Prior to such information being widely disseminated on the internet, going to IBD for the apprenticeship aspect of the job was a very legitimate strategy but is now one that no longer holds much water IMO. That said, IBD is a phenomenal way to create large optionality in your career. I frankly recommend any non-Ivy kid that doesn't have it all figured out to get into consulting or IBD out of college for this reason (note: I don't know much about consulting but this seems to be just as legitimate as IBD if you are at the right places.) I think if you are graduating from an Ivy and especially one of the upper-tier Ivy's you will generally be given more chances to pivot in your career solely from the branding and therefore I would generally recommend those kids to take more risks early on.

So to sum up - very personal decision based on your career interest, lifestyle goals, tolerance for risk, desire for optionality, and how potential contingency plans fit into all of those factors. But hopefully this can help you framework your decision process.