Why do banks still hire fresh grads for S&T
Everyone and their moms is saying the industry is dead and won't recover, so why are banks still hiring s&t grads and interns?
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Perhaps it’s because it’s not as dead as everyone is afraid of
Do you think banks hire based on your best interests and long term career prospects? We need analysts to do all the bitch work on the desk, and replace the 75% who will leave in 2-3 years
Since you're commenting here I'll be blunt. I'm currently rotating through IBD and Markets division. I dislike IBD and prefer to be in FI Sales. While I have the opportunity to start there, do you think it's going to die?
has been discussed 100x on here but here it is again
Do i think human traders are going to be completely extinct? No. I think it will be 1-2 traders human trader per product, like spot fx now, at each of the 4-5 dominant banks. There are fewer and fewer hf seats, eith tighter risk limits, and you basically get 1 shot to trade with a perfect sharpe, 90% will fail, and After that, there’s nowhere to go
The problem with starting a career in trading is that The expected value is shit. The avg pay for a vp/director who used to make 6-700k is now making 3-400. The outsized playoffs are gone where people would make 5-15mm, now you’re gonna be lucky to make 1mm in a blowout year if you’re not an MD. It sounds like a lot of money when you’re 21, but then you realize there’s an extremely high probability of getting laid off when you’re 37 with no real skills, and can’t get hired doing anything else. It’s depressing how many ex-VP’s and directors who moved to top hf’s are now working as brokers or trying to sell trading software on a commission only income.
TLDR get a job doing something else, and trade your pa aggressively if you love markets
curious, when are you going to exit the industry?
I will say this and it will sound stupid and uneducated, but it takes people to make a market at some point...If two perfectly optimized systems are trying to trade off of flaws that the other system has they are never going to trade. The systems can be optimized to the what is essentially perfection or as near as they can be programmed to be, but if their isn't a counter position being taken you don't have a market.
No human speculation = no volatility, which means markets would halt. Computers can’t completely make a market, it just wouldn’t work theoretically because they’d arb the same risk away...so there’d be no risk left, which means no market.
It's not true to say that markets would halt my friend. There will always be pensions, SWF, hedge funds, asset managers and increasingly so, retail investors. The business model in banks would eventually evolve such that those with the largest volumes and internalize the greatest p & l at moderate risk levels. Sure, there wouldn't be as much prop positions taken by banks. But they would continue to make money out of spreads. It would just become a volume game rather than a directional game. But will they still be relevant? Yeah pretty much. Would you still need sales staff? Maybe a lower headcount, but they'll still be necessary for sure. Same story for traders as well. However, traders would also have to evolve their skill sets to adapt with the times.
Saying there would be no market is an exaggeration. There would always a market, just at what price. Maybe spreads would be compressed to extremely narrow levels, but that would mean the cost of trading would also be significantly lower potentially encouraging greater volumes.
I'll be honest here, the idea that all trading will be automated is utter and complete nonsense. There are products that are simple impossible to automate. To say that industry is dying is also not accurate in my opinion, capital markets are as big as they ever have been, large tech companies and other players outside of banking have huge cash piles and are building their own desks as well. Further, I'm at a top BB and I do not see salaries falling like others say they do. Are people making pre 08 numbers? of course not. Are people being well compensated based on the success of their desk? Yes. There are still plenty of MD's clearing 1m on BB desks..
Yes, this is exactly right. When veterans say the industry is dead or dying, they said that because the salaries being out aren't as eye-watering anymore. Salaries in S & T by any standard are still strong; but just not what it used to be in the past.
Read here:
https://www.nytimes.com/2009/10/10/business/10citi.html
https://www.theguardian.com/business/2009/oct/15/goldman-sachs-record-b…
thanks for sharing... not to mention the huge compensation numbers that we used to hear about in the past we're mostly outliers that I'm sure people in finance saw across the industry. Remember the pre crises days of ridiculous holiday parties? There was just a more wreckless cash based comp structure back then, it didn't matter if you we're in middle or back office either, their bonuses were more generous back then than it is now. It's silly to discourage students to not pursue a specific job because in 10 years they may be making 300k instead of 415k like they may have in the past. Banks now are bigger than they ever have been, and you can say that there's a lot more job security now than ever before as well (of course there are event driven lay offs but there will never be a lehman type lay off nowadays) IMHO it is only a matter of time before regulations loosen on banks, the business model is evolving to generate revenue in low rate environments, etc.
The people who say the sky is falling in S&T are either not actually in the industry or are at a below average area in the industry. People on WSO really need to stop spreading misinformation to the people who actually come here for help
It’s not a sky is falling scenario, nobody is saying that. Rather, it’s a very slow reversal to the mean. It’ll be a job with regular pay, limited seats and limited opportunities. Joining a consistently shrinking business is never a good idea when you have a 40 year career ahead of you, especially if you have so many alternatives in high growth sectors.
Besides, fixed income will join equities in terms of automation. We’re already auto pricing most of FX, standard swaps, government bonds and the more liquid corporate bonds. It’s only a matter of time before the rest will be automated too.
There will still be people that oversee the automation, but they’ll need a different skill set and they’ll need less people. Basic desks like FX and government bonds are shrinking already. There will still be people that manage relationships on the sales side, but they’ll be able to manage more relationships when the routine side of the job has been automated (settlements, executing and booking flow trades, standard relationship management like sending market updates, etc).
How many equity sales people are left? A couple per bank perhaps? That’s the way FI will go too.
Just flat out disagree with the automation sentiment, the products that can be automated already have been... there's so many products that cannot possible be automated included a huge segment of FI. And to your point, everyone is saying the sky is falling lol all you see on here is that trading is going away to computers. If anything this is more true on the buy side than the sell side.. I've spent time on both, across many different products and can tell you that 80%+ of trading floors will be safe from automation. I've even worked on projects where we introduce more technology to our desk and guess what, the headcount did not change
actually nevermind, based on your posts you clearly have no idea what you're talking about and you're part of the problem on WSO. pointless convo
Lol ok. I've worked at multiple top BBs covering everything FI related from super structured to very vanilla. I have a better insight in the business than most folks who only see one tiny part of it.
In my time, the US corporate trading desk went from 8 traders to 3, with one covering the illiquid names and two the liquid names. The dude told me he felt like a quoting robot as he was responsible for 8,000 corporate bonds. The government bond trading desk has gone from 8 to 4, with analysts not even getting a third year offer and being asked to leave. IR Swaps and FX forwards trading has gone from 9 folks to 5. FX spot trading has gone from 8 to 3, with some being laid off recently as they're being replaced by algos.
When I started everything was manual and the phone was running non-stop, now we're autopricing pretty much all FX, standard cleared IR swaps are similar to an equity listed derivative, euro government bonds, UST and SSA are autopriced depending on the bond and trade size, corporate bonds are mostly autopriced, etc etc. The few manual trades are mainly executed over Bloomberg, and I’ve been told they’re working on an algo that can pick up chats and relay the information to traders, and then double check the quoted price and send it back to the client. We can already autobook stuff by posting details in a dedicated chat. The algo is already clever enough to pick up the info. It’ll be a while before we’re there, but it’ll happen. At that point, analysts won’t be necessary anymore, and sales people will be able to cover an even greater amount of clients.
On the sales side, there are new teams that cover 300+ smaller institutional investors per person who only trade electronically, and the teams that cover the big institutional investors have gone down in size too. The team that covers major asset managers went from 8 to 5, the HF team from 9 to 6, etc. On top of that, senior management isn't leaving so associates can't move up.
ok well I left a top BB after 3 years and have been at another top BB for 3 years and counting and basically none of what you're saying is the case, in addition associates get promoted on schedule every year so I really just don't know what you're saying. If anything the senior managers are the people who are getting let go and they are keeping the mid level people. You're either clueless, misinformed, or just a moron and considering your other posts explains you've spent 6 years as an associate it sounds like your boss shares my thinking
Monkeyfaces I'm guessing you do macro sales at a foreign BB that has a limited US banking presence because there is no way you are actually doing any deals in IG or HY with only 3 traders? My bank may suck at tech but you can't actually trade any real size with that few traders in IG. You need at minimum 3 people just to trade 5yrs and in effectively. I think you are in a bad seat in the sense that your firm won't hire an analyst to do the grunt work so you can get out on your own and develop business. Everybody pitches in and does grunt work when it needs to get done, as a VP I do some ops bs if our analyst is busy working on something for someone else. I don't do much macro stuff but I would imagine its much harder since there is limited bid/ask and limited new issue in that world.
guggroth93 My experience has been more like yours and that junior people have come in and been able to move up just due to natural turnover. Maybe my bank under-hires at the junior level but if you are decent and work hard it seems that people find a way to move up.
I work at a BB doing sales in all FI products and you have to embrace the technology as a salesperson. Who cares how the trade gets done (Chat, phone, ECN, etc.) all that matters is the end result. Any idiot can ask a trader to bid this or offer that and personally when a client comes to me asking for an offer on some odd lot or sends me a list of bonds to send to the desk to bid on, its a total waste of my time. The job of the salesperson is not to execute trades its to manage relationships, get the clients to focus on axes the desk has and vice versa, figure out what customers are trying to and how they view the world, highlight ideas and relative value stuff that fits certain people. None of this is rocket science and I'm sure an algo will figure out how to do eventually but for the time being that is the job. The improved tech has for sure led to some job losses as you can do more with less and its made it harder for junior people to develop relationships as there is less opportunity for them to interact with clients in doing backup execution when someone is out but if you embrace the tech and work with it you can do a ton more.
In terms of pay and longevity, the business as a whole is dying a death slow death, does not mean that you can't make money at it but you should save your money where you can and just know that if you are under 40 this is not going to be a career for you, you will do something different at some point who knows what that will be and when but if you are able to get your foot in the door and last for sometime you should be able to figure it out. I have seen plenty of people move to different things that may not be as lucrative but keep them in a very nice standard of living.
How much are associates and VPs making?
it really depends on a lot of things, the specific bank is probably the biggest factor, followed by the product your desk covers, and it depends on the year (desk performance will be a variable thing based on trading environment and sales environment) I would say all things being equal; in a good year at a solid bank there is no reason why an associate would be making under 200k all-in if that helps? Again this is a really variable dependent equation and base compensation is all over the place for people who aren't 'program' recruits. For example if you're recruited to JPM as an associate straight from b school you may have a higher base comp than let's say an associate lateral hire from a lower tier bank. Just like banking it's difficult to put a square number on things like comp but it has the same ball parks that you can imagine
What about doing s&t for 2 years out of college and then moving on to another industry? Seems very interesting to me out of school but I realize that the skills don’t carry that much weight long term.
Why? Frankly it’s a waste of time, and it is WAY easier to recruit out of school with a blank slate then it is to lateral with 2 years of fucking around on a trading desk booking tickets
Man, this gets brought up weekly it seems like.
It is a well paying career still, despite what others will say. Has comp and overall prospects gone down? Yes. But it is all relative.
Comp is still very attractive for new grads, and I would argue that often times more than IB when adjusted for hours worked and overall satisfaction with your life/job.
Some will say that the hours keep getting longer and longer but my hours are great... and I’m a first year analyst. If I’m in the office past 6pm its because I want to read/learn, etc.
It is all perspective.
However, I do see the writing in the wall so I will jump ship after my analyst stint or soon thereafter. In the meantime, I’ll just enjoy the short ride.
s&t comp does not look attractive when I get offers from FAANG
I like trading b/c I love markets, but I get second thoughts over the future of the industry b/c I'm a quant and have FAANG offers
Most people going into S&T do not have the background to get into FAANG. If you can go into FAANG, do it. But also, keep in mind that it is not beyond the scope of the conversation to say that FAANG also has issues. Tech companies are fleeting, will your stock in XYZ company be worth shit in 10years if the next Facebook comes around? Who knows. Further, the Biden administration in all likelihood will pressure big tech from an anti-trust standpoint, which is another headwind. Also, of course this can be argued, but tech could be in a massive bubble right now (my view). What if layoffs start happening there?
Moral of the story is, if you want to make bank, get comfortable with uncertainty. The grass is always greener.
Make a choice, and go 100% at it.
Because someone will have to do the monkey work. Directors and MDs don’t want to execute and book trades, manage tedious spreadsheets, deal with settlements and ops issues, menial client questions, etc. It’s not very difficult, and requires high attention to detail, but I feel that pretty much anybody who’s comfortable with numbers can learn to do the analyst/associate part of job. It’s not rocket science. This means you’re very replaceable at the lower level, and that’s exactly what happens.
Banks hire new analysts to handle the routine day to day so that the senior folks can focus on the big picture stuff, the long term relationships, the interesting trades, the high dollar ideas, etc. The higher ups aren’t going anywhere, so turnover at the bottom is really high.
Average turnover for new hires is less than 2 years these days, which should tell you something about the long term outlook for new joiners. Global front office S&T headcount has been shrinking at about 5% per year since 2014.
While pay is still relatively high, job security is very low and the hours are pretty long and stressful. Culture in most groups is still relatively stuffy and cutthroat too. Moreover, after a year or two you won’t learn any skills that translate well to other industries.
Most analysts realize this and jump to tech or start ups where the pay is perhaps slightly lower, but the hours are better, the culture is more “fun”, and you learn transferable skills. If your start up does manage to make a successful exit you end up with more money than 20 years in banking will have made you, and most of your former finance colleagues will be very jealous of you.
Tl;dr: Banks will always hire new analysts, but it won’t be in your best interest and they don’t care if you’ll be able to have a long and fruitful career. Churn and burn as I’ve heard senior leaders call it when they think nobody is listening.
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At FANG pay is actually higher than S&T, even for less technical roles like product management. A hell of a lot less stressful too. One typo won’t cost Facebook millions of dollars.
S&T pay is also much lower in London, so I guess it evens out a little. With the inevitable move to Paris/Frankfurt I wouldn’t be surprised if European S&T pay drops another 10-15% over the next few years.
when are you going to exit then?
I have no idea. I have kinda missed the boat. It’s incredibly difficult at this point. I don’t have the right experience for roles that are equivalent in seniority, and for much more junior roles I have “too much experience” so they generally go with a college grad.
I’ve tried lateraling to IBD within my bank, but that would mean starting over as analyst 1, and that’s a tough pill to swallow. Maybe I’ll bite the bullet next year. Ironically, all in pay would be about the same.
Every MD I have ever worked with still maintains a trading book and client relations almost as much as an ED or VP
Yes, that’s the point. They can focus on that because analysts are doing the grunt work.
You're also a desk analyst for basically the first two years in S&T at most banks, and if you combine that with an illiquid trading desk then your exit ops aren't as bad as this sub keeps regurgitating. You have to realize that most people on this sub keep saying the same things over and over with little to no basis - I've known a few people that lateraled to banking after 1 year of doing S&T and also people going to MM PE after S&T. Rarer than IB? Sure. Impossible? Not at all.
Yes, anything is possible after 1 or 2 years. I know it can be hard to imagine seeing as you’re just an intern, but 1 or 2 years does not make a long career. Try looking for exit opps with 5-10 years of S&T experience and you’ll find a very different story. Where would a VP who gets laid off because of another round of downsizing go (remember, the industry is shrinking 5% per year)?
The fact that folks are leaving after just a year to do something different shows there’s some truth in what people are saying here. If it was such a stellar career choice people would stick around longer.
would you say equities is pretty much automated? so whoever gets offers in equities is relatively safer now?
Was wondering the same. MD told me that in london currently 70% of market is automated (compared to 90% in US). And he believes there will be significant downsizing but equities should be fine since it's already super tiny. There needs to be at least a handful of people
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