Sales and Trading ... ?

<p>I just read Monkey Business: Swinging Through the Wall Street Jungle, and that book has scared my pants off. If investment banking is like what they say it is, I doubt I'll be able to handle it. What really worried me though, was when they said that what they do in banks does not require them to think. I want to join Sales and Trading (not M&A, the department in which the authors worked) and I thought that required a LOT of analyzing markets and THINKING. (The authors go to considerable lengths to explain why thinking is not necessary in M&A)</p>

<p>So could someone actually familiar with IB explain the differences between M&A and S&T? Could you please compare them based on the following: Skills required, hours/day, stressfulness of the work, relative salaries (including bonuses), hierarchies, and difficulty to break into.</p>

<p>Thanks in advance!</p>

<p>Just to clarify, the idea of S&T that I had was more Liar’s Poker than anything else.</p>

<p>Haha, yes, I remember reading Monkey Business and Liar’s Poker. Both are absolutely hilarious (although a bit exaggerated) accounts of IBD and trading, respectively. Keep in mind that both accounts took place a while ago (MB in the early 90’s and LP in the early 80’s), so they’re a bit outdated. Both banking and trading are a bit tamer now, especially trading.</p>

<p>In terms of the differences between M&A and S&T:</p>

<p>High level overview:
M&A is a subgroup of IBD, which is the corporate finance side of a bank. IBD folks work directly with companies to provide financial advice, help raise capital (either debt or equity), advise on mergers and acquisitions (M&A), etc. It’s very transaction/deal-oriented. Analysts spend most of their time developing pitch books and financial modeling via Excel. In sales & trading (S&T), your work involves buying and selling securities, which can be equities, options, commodities, fixed-income products, currencies, etc. Your day to day work will involve monitoring positions and updating accordingly, and may also involve modeling and analyzing companies/markets.</p>

<p>Skills required:
IBD requires lots of endurance, stamina, and attention to detail. Nothing about it is intellectually challenging - modeling is simply working with elementary-level formulas in Excel. But there’s no room for error - you’re expected to not have a single typo even after 100+ pages of data. S&T is definitely more quantitative, but not to any real extent - quickness and mental math ability is much more important than sheer knowledge. Unless you’re a quant, you’ll never need to use differential equations. You also need to be good at multi-tasking and making quick decisions - traders often will be using 8 monitors at a time, as well as talking on 2 phones at once. After all, when you’re trading, every second is a precious opportunity.</p>

<p>Hours:
IBD has very long hours (80-100), but there’s lots of downtime. S&T hours are shorter (50-60) because most of your work occurs when the markets are open. S&T hours are also much more predictable and regular, whereas in IBD, you never know when you might get called in to the office.</p>

<p>Stress:
Both are very high stress roles - there’s no way to sugarcoat it. The stress in IBD is more due to the long hours than anything else, whereas in S&T, the stress comes from the fact that, every second, there’s an opportunity to make or lose money. And you can lose a lot very fast. I like to use this analogy - think of S&T as having to take a timed exam, and think of IBD as having to do a take-home project. The hours are longer in IBD, but S&T is more intense.</p>

<p>Salaries:
Both have good salaries. At the analyst level, base and signing bonus for both roles should be identical. Year-end bonuses are similar as well. At the senior levels, there’s more variability in S&T pay, i.e. the best traders make much more than the top bankers. But the catch is that S&T is a much more volatile job. A top trader one year may easily get fired the next if he loses a ton of money.</p>

<p>Hierarchies:
In general, they’re the same: analyst -> associate -> VP -> senior VP/director -> MD. IBD is more rigid though, where even if you’re a star, it takes a certain number of years in each position to move on to the next. In S&T, if you’re good, you can rise up the chain very fast. Also, most associates in IBD have an MBA (in most firms, it’s almost a requirement), whereas few traders have advanced degrees.</p>

<p>Difficulty to get in:
Both are difficult to get into, considering they’re the most sought-after jobs among elite college students. IBD interviews will focus on fit, general industry knowledge, and finance/accounting knowledge. S&T interviews will also focus on fit, but will test your mental math abilities and knowledge of markets and investing.</p>

<p>You mentioned that you want to have a role that requires you to think. Both jobs will, believe it or not, develop your analytical thinking skills in meaningful ways. You’ll get lots of industry exposure and corporate strategy exposure in IBD, while you get more insights on various markets and quantitative stuff in S&T. I’m a bit biased towards IBD, because I believe it develops a broader range of skills and knowledge. In S&T, you’ll likely become an expert on some esoteric derivative product, but will know little about anything else. The exit opps from IBD are much more broad, from PE to VC to corporate development. From trading, you basically have to either stay in trading or go to a hedge fund.</p>

<p>Let me know if you need anything else answered.</p>

<p>Wow. That was a thorough reply! There’s really not much left to ask. I’m not sure if I ever want to do anything other than trading; it seems like the perfect fit for me. IBD definitely isn’t, though. I really do want a life too. =/</p>

<p>How different is trading now than the description provided in Liar’s Poker? Specifically, is it still as “deceptive”, political, and Alexander-like? (Alexander refers to the Liar’s Poker character)</p>

<p>Your post should be stickied, btw. In a separate thread if required.</p>

<p>That era in S&T is largely gone. Goldman Sachs, for example, primarily hires math/physics/engineering/CS majors for FICC (fixed income, commodities and currencies) which accounts for roughly 60% of its profits. </p>

<p>p.s. don’t do IBD–100 hour weeks slowly peel your life and soul away</p>

<p>Haha yeah the environment is a lot different than Liar’s Poker for the most part. I would say, in general, the people are more from a prestigious academic background (like Viper mentioned) though there are groups that still have traits of the “fratty” aspects of the mortgage guys in LP.</p>

<p>ForeverZero did a great job explaining everything, I don’t think I have a heck of a lot to add. If you have any questions feel free to reply or PM.</p>

<p>“Goldman Sachs, for example, primarily hires math/physics/engineering/CS majors for FICC”</p>

<p>This is very interesting. I thought the vast majority of traders were econ majors (the interview questions supposedly ask questions about finance and the market, unlike IBD interviews), and that just the quant traders had the above degrees.</p>

<p>Could someone clarify?</p>

<p>EDIT: Just read Forever’s post again. He says:
“S&T interviews will also focus on fit, but will test your mental math abilities and knowledge of markets and investing.”
Yea, that’s what I meant.</p>

<p>I can’t argue with most of what has been already said, and most of the basics have been summarized pretty well. I would, however, argue that S&T is normal at 50 hours per week and IB is normal at 100 hours per week. IB definitely works longer hours than S&T in general, but it is nowhere near double. I know several analysts and associates in S&T who regularly work from 7am to 9 or 10pm (and even go in on the weekends for a bit, although often because they want to leave on Friday a little earlier). Yes, some S&T groups obviously have shorter hours, but so do some groups in IB (I know if 1 group at my bank that generally works from about 8am to about 8pm on average - on the opposite side of the coin, I know of another group that routinely works from 9am to about 2-3am). </p>

<p>Although they often get a terrible rep, bankers often work from 9am to like 10pm, 11pm, or so - there will, however, be far more weeks for bankers getting stuck working till 4am and working long weekends than S&T. Honestly, it depends on the bank, on the group and on the current market more than it depends on some arbitrary notion that dictates bankers work until 2am all of the time.</p>

<p>Beyond that, the other thing that I want you to keep in mind is that S&T appears to be coming off as a bit more glamorous here (not putting down IB, but rather showing S&T as a bit better than it is), and, in my opinion, at upper levels, it is - at lower levels (analyst, even associate), it is not. You will spend a lot of time, especially depending on the group within S&T you are in, monitoring trades, following markets, and working on a ton of pitch books and chart analyses. Bankers do a ton of pitch work, but S&T does a ton of pitch work as well - it is an inevitable aspect of the job, both jobs, to explain your products, win business, and so forth, all of which involves a ton of pitch work. Yes, bankers do more, but S&T definitely has its fair share. </p>

<p>Finally, the stress levels of IB are quite real and can be compared to a regular exam just as S&T was. A takehome exam implies that you can work at your own pace, but in IB you may have some downtime during your day, but it is not your choice - then a project will fall in your lap and suddenly it’s fire alarms, bells and whistles - in other words, get your butt up and go time. </p>

<p>For the most part, I agree with the comments above - for senior level positions, if you are good, you will definitely be rewarded better in S&T than IB - however, as was already mentioned, the job security, although both limited, will be greater in IB. </p>

<p>Honestly, people that say IB does not require you to think, but S&T does on junior levels is lying (in my humble opinion). Out of all of the analysts and even most associates that I know, very few, if any, feel that they are truly being utilized and mentally stimulated. Analyst level positions are by design geared towards preparing you for your next opportunity - if you are interested in staying with IB, going to PE, corp development, VC, etc - go with banking. If you are interested in S&T, or hedge funds, go with S&T. You will develop strong skill sets in both (although I too am biased towards IB), you will be worked like a dog in both and at the end of the day, you will wonder whether it was worth it - the answer to this last question will largely depend on what you make of it, and what you get out of it (exit opps, experiences, etc). </p>

<p>If you have any other questions, feel free to PM me.</p>

<p>IBanker</p>

<p>i worked from 6am to 8-9pm last summer in S&T, but I did leave at 3pm every Friday coz everyone on the trade floor was usually gone by then except for the MO… Structuring works even longer hours sometimes. But hours decrease much faster than IBD as you move up I suppose. I see traders coming in, trade and leave by 2pm (my market closes before 2pm)</p>

<p>“Honestly, people that say IB does not require you to think, but S&T does on junior levels is lying (in my humble opinion).”
Agree, the only exception is if you are a quant. I see junior quant analyst building really complex math models.</p>

<p>Thanks for the replies guys. I definitely want to go into S&T after reading this. It seems like a better career choice. Could someone please elaborate on what degrees are needed for S&T? Specifically what would I need to stand out and get an interview, and which degree would help me on the job?</p>

<p>The same degrees to break into IB as an analyst are needed for S&T - standard U Grad - although math, econ, stat, etc are preferred as S&T looks for more quant, while IB is indifferent about major - especially if you attend a Target school. </p>

<p>Regarding advanced degrees, IB likes the MBA, while S&T cares more about PhDs and other finishing degrees in heavy quant fields - at least if you are going into model-driven funds or groups.</p>

<p>Besides exit opportunities, IB has absolutely no advantage over S&T. But this is a moot point–the only reason IB kids look for exit opportunities is nobody wants to be in IB as the hours suck, the pay is inferior and promotion practically requires an MBA. S&T kids, on the other hand, would never want to leave S&T :)</p>

<p>The thing that’s always turned me off about trading is that all you’re doing is moving money around while sitting in front of a computer. You never “create” anything and after 30 years of work, what do you have to show for it (except money)? What impact have you made? The fact that you are never a part of anything significant makes trading feel rather…hollow and unsubstantial. Feel free to disagree</p>

<p>I don’t know, I don’t think most people go into finance to feel like they’ve made a difference in the world. If you want that you go do Teach for America or something. You can say you just move money around, and perhaps its a pretty fair point, but you also are helping major corporations hedge their risks and get the satisfaction of being on the positive side of trades managing some major risk. Perhaps it just depends on the person, some people like having PNL to point to, others M&A in the headlines, etc.</p>

<p>Awped, all your heart does is “just move blood around” yet it’s the most pivotal organ in your body. In much the same manner, traders may be just “moving money around” but their work forms the cornerstone of the American economy.</p>

<p>Yeah and I think if I did what my heart did for 70 years I’d be pretty bored and near suicidal. I’m not saying traders aren’t an important part of the financial system, I am just commenting on why the job itself (i.e. the things you do repetitively every day) doesn’t appeal to me.</p>

<p>No finance isn’t about “making a difference” in the world, but at least in banking you can say you took part in the merger of XYZ. You also have the chance to travel to different places and interact with the leaders of some of the world’s largest corporations. The work you do in PE/VC or the finance department of some Fortune 500 is similar in that you have a chance to play in important role in shaping the future of many companies.</p>

<p>I am not trying to change the world or anything, but wouldn’t it be good to look back on your career 40 years later and say that something you did actually had an impact (on more than the price of a stock)?</p>

<p>^ Agreed, which is precisely why I am much more interested in IBD (and M&A in particular) than S&T. IBD deals with complex transactions that have macro-level effects, and is client-driven. If all you care about is making money, then S&T -> hedge funds is by far the best and quickest path. People called me crazy when I turned down a hedge fund offer to go into banking. But looking long-term, I’d go crazy if, 20 years from now, all I did was sit in front of a monitor all day and buy/sell securities.</p>

<p>You are indeed crazy if you think S&T and hedge funds entail nothing but sitting in front of a monitor all day buying and selling securities.</p>

<p>I wonder how inefficient our energy market would be and what gas price would be at without energy traders providing the liquidity</p>

<p>@nauru I was exaggerating a bit, but it’s definitely what 70+% of the work is, even at the higher levels. At least it is at the fund I worked at.</p>