Why is Sales and Trading less popular than IB?
I am a BBA student at Ross and there seems to be an overwhelming preference towards IB over S and T and I was confused as to why this was the case. Is this a Ross specific thing or am I missing something? Why does everyone seem to be funneled into IB?
Tbh, it's a very straight-forward and natural consequence of one phenomenon: there are way fewer seats in S&T than in IB. By now, each desk on the street probably has 0-1 new analyst a year. The reasons for this are not the point here (some are simply automated), but I will say it's fairly stable now, ie, not going to be less in the foreseeable future.
The consequences of this phenomenon are:
1. Fewer students going back to campus bragging about pay, work, etc. As dumb as it sounds, this is a big mechanism for how a lot of high-finance jobs attract new grads applying every year. You got these seniors finishing their summer internship, talking about how much they make, how prestigious their job is, how great it is to call yourself a trader/banker/analyst, and underclassmen in the finance club got intrigued and decide that's the career to pursue! There are fewer junior traders to do this now.
2. Less seats to apply. In a lot of illiquid product desks, old traders are living a comfortable life making money. Take my own market for example: energy traders are bringing home huge paychecks in good years, doing fine hours, talking to clients they know for years, and thinking about things they like and are good at. The job is still good and makes a good career, but there are no new grads needed; the young trader also doesn't burn out and leave; there is very little turnover. So obviously, a job that doesn't take hundreds of young bodies is not going to make much noise/be popular.
3. The remaining seats require real technical skills. Not saying it's rocket science, and also not saying a banking job is easy. But why S&T has less discussion than IB probably has to do with why it "seems like" more people are crazy about IB than quant trading: the barrier of entry is higher. For whatever reason, if a product still exists and makes money, it probably survives due to the skill or illiquidity that tech can't replace. Junior also would require coding knowledge and better market knowledge to get those jobs. (this is way too generalizing and vague and not accurate, but the main idea stands: remaining seats now can ask for technical skills that are not just something an analyst can do with writing CIM, putting up a pitchbook, or setting up calls with buyers)
So S&T now shouldn't be as popular, and doesn't need to be popular either--bcs you will get enough qualified candidates already without utilizing creating a fantasy for college kids; if you have the skills and like it, the job is for you. If you are still undecided, maybe do a generalist job or just try something out--and I will say the majority of college kids are undecided.
This is so helpful and answered all of my questions about the topic. Thank you so much!
so banks have less S&T seats than prop shops trading seats?
Pure S&T yes, but prop is mostly buy side quant stuff, banks will have structuring/FI/client roles that prop doesn't have.
One other thing is add is that S&T has a tighter filter on majors/skill set compared to banking. You can get English, history, and accounting majors to all pretty easily get IB roles, given they are smart enough. A lot of those same resumes wouldn't be that great for S&T, or at the very least would be behind a good STEM candidate. So, you have a much wider net in banking, and its easy for one guy in your major to go into banking, and think its the path to Wall Street.
IB also has more "business" exit opps - way easier to go into corp dev/PE or lateral into something else from IB. The path is pretty clear and well-worn. S&T doesn't.
The last bit is risk aversion - IB is one of the most risk averse jobs you can get if you're a high-strung, neurotic person who wants to be good at checking boxes (i.e. most people at ivies, or the top end of state schools). You trade your life for the comp, exit opps, and prestige. S&T needs the opposite types to thrive. Most people, even high-achievers, tend to bucket to the former.
What type of person would you say thrives in S&T?
Imo, risk taker and willing to work and take decision with incomplete information. Needs to be commercial minded though more for physical trading.
Someone who is competitive, entrepreneurial, and NEEDS to keep score on an individual and team level each day. If you have those traits and can learn by osmosis you do very well in S&T.
Some very good comments here already so would just add:
1. The IB route is more plain vanilla. I think the multitude of products in S&T makes it difficult for kids to pinpoint a desk and say “I want to do this”. There’s just a lot to choose from, most of which you won’t have seen in undergrad or even grad school. Seen it so many times where someone is smart but doesn’t get the “logistical/operational” aspect of the job or even the other way round! Many desks have different software these days so you’re having to learn that as well. By comparison, the “product” that IB sells is broadly the same: its advice on different industries. This is why IB has broader exit opps, you don’t know a niche product (in most cases), you know an industry.
2. Inflated career aspirations or decision making driven by money. I find the majority of people these days try to get into IB because it frees up that HBS MBA to KKR partner “route”. The fallacy is everyone thinks they can get here, the reality is only the 1% will. By the second year, the analyst class will likely have reduced by half in IB, maybe more because they realize they don’t want to stick it out anymore or they frankly weren’t good enough at the job. The same is not true for those in S&T simply because the junior class is much smaller. Of course the grass is not always greener on the other side as many HFs I feel now look for Associates-VPs rather than Analysts when hiring new traders. This is a long way to say “if you don’t care about PE there’s no point being miserable for 2 years”.
3. Imho part is also PR. Between all the clickbait on HF performance, the doomsday prophets telling everyone passives > actives and the GFC, business schools inherently reinforce the idea that the trading floor is dead and/or full of thieves while the PE overlords rule all with an iron fist. It’s kind of bs honestly. I went to a target grad school and 90% of the case studies were about fuck ups at HFs lol
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