Part of the reason for creating this site is that while there's lots of solid information online about investment banking generally, there's much less about sales and trading.
This is a bit odd given that sales and trading is a major division within every investment bank, but perhaps also unsurprising given the vast diversity of roles that exist within S&T.
The reality is that if you're looking at joining a firm like Goldman, JPM, etc. in any capacity you're probably high achieving and a little risk adverse as it pertains to how you view your career (that certainly has applied to me!).
So many people who think they'd really enjoy a role in sales and trading get skittish due to what they hear about the variability in exit opportunities that exist. To my mind, this is entirely rationale because no one wants to do well in a career, make quite a bit of money for five or ten years, and then one day get let go with few alternative options to pursue.
While I was in college, I thought quite a lot about this. Even though I was doing summer analyst stints at firms like Goldman Sachs, I was desperately worried about whether or not I should go for the safer, more predictable path that investment banking provides as opposed to doing S&T.
While this post will be dedicated to discussing some of the common sales and trading exit opportunities, it should be noted at the outset that worrying about exit opps is rationale, but a bit overblown.
Ultimately, you have to like what you do and being miserable in banking, then being equally miserable in private equity, is tough to endure. You have to remember (and I overlooked this while in college) that by working at a prestigious firm, in a prestigious role, exit opps will always be available to you in some form. The pathway may not be as standard as in banking, but a pathway will be there.
Sales and Trading Exit Opportunities
Below is a short description of some of the exit opportunities that are available. Of course, some of these will be more applicable to those who have been in trading and some will be more applicable to those who have been in a sales role.
It's impossible to get too in-depth on any one of these, but hopefully this gives you an idea of what some of the most common exit opps are for those in S&T.
Lateraling to a Different Investment Bank
Prop Trading
Execution Trading
Investor Relations
Product Management"
Crypto Trading
Regulatory Roles
Middle Office Roles
Lateraling to a DifferentInvestment Bank
Some may quibble that this doesn't count as a true exit opportunity. But it's important to note that it's very common to work in S&Tfor 2-4 years and then get poachedby another investment bank(usually at a substantially higher salary or title).
Sometimes you'll get poached to do exactly what you were doing beforehand. But often you'll get poached to get involved in a slightly different product or to help build out the sales and trading of the product you were trading at your old bank.
Unlike in investment banking - where moving from Goldman TMT to Evercore TMT won't change your day-to-day work much - often when you move to a different bank in S&T you'll have a substantially different set of responsibilities even if you're involved in the same asset class.
Also, lateraling from S&T at a certain bank to working in an entirely differentdivisionof another bank isn't entirely uncommon (if you want to do it). So, for example, some move to a different bank to do investment banking or something in capital markets (ECM, DCM, Lev Fin, etc.) after getting a bit tired of being so market oriented in sales and trading.
Prop Trading
A decade ago, almost everyone on a good desk at a good bank would at some point move to a hedge fund or a prop shop. This is because, as I've discussed before, prior to Dodd-Frank there were a number of desks on every trading floor that were driven largely or entirely by a profit motive, not by making markets.
With the introduction of Dodd-Frank, every desk is now ostensibly focused on market making. However, as I've also discussed before, that doesn't mean that trading within S&T is devoid of any discretion. On most desks there will be a large difference between good and great traders and the PnL of each trader will reflect that.
For example, when I was doing my summer analyst stint at Goldman I was put on the rates desk for a rotation. Almost everyone on that desk - which was highly regarded - is now on the buy-side at hedge funds.
Basically what has happened in buy-side recruiting is that now you can't just go to a hedge fund and say, "Look I made $X profitover the last two years" because you'll be primarily focused on market making not just making discretionary trades that will be profitable (as was the case on the old prop desks). So it's a bit harder to judge someone's track record.
Now hedge funds and prop shops need to interview candidates more closely to figure out whether or not they think they'd do well making purely discretionary trades. But, to be clear, there is still no better training ground to learn about an asset class, learn how the market of a given asset class really works, etc. than at a large bank in S&T. There's a reason why very few hedge funds hire directly out of undergrad or graduate school (although some prop shops that are more quantitative do, of course).
Execution Trading
In the prior section I discussed "prop trading" as opposed to just saying "buy-side trading". The reason being is that when it comes to buy-side exit opps coming out of sales and trading you can think about them as being broken down into two distinct categories: prop and execution trading.
With prop trading, you're given some amount of money (or, if you're junior, you help someone more senior managing some amount of money) and attempt to make more of it with limited restrictions. In execution trading, you'll be working at a hedge fund or asset manager of some kind and a team of analysts will come to you and say, "We want to build $X position in a certain security, can you do it as cheaply as possible?"
Execution trading is a deeply valued position in some funds that focus on more illiquid products that don't have great price transparency. Obviously, a $1bn large-cap equities hedge fund doesn't need an execution trader. However, a distressed credit fund absolutely does! That's because distressed credit - just like all the more thinly traded asset classes out there - requires someone with a deep knowledge of the market to build up a large position.
For example, in distressed credit an execution trader may need to call around to multiple banks, talk to third-parties who hold the debt you want, etc. and stitch together the amount that your fund wants to buy over weeks or months.
So, to be clear, while a prop trader has discretion over what to buy, an execution trader does not (but has discretion over how they figure out how to build up the position that the fund wants).
Depending on the fund in question, execution trading can be highly lucrative, but also not as stressful as prop trading (as you are largely not making the decision on what to buy). However, it's still an incredibly interesting pathway because building up and unwinding positions in illiquid or complicated (derivative-based) products is often very hard work.
Investor Relations
Investor relations is a popular exit opportunity for those who have been in sales. This will involve going to work at a bank, asset manager, hedge fund, or private equity fund and talking to investors about the firms performance, strategy, and future fundraising.
Those with deep asset specific knowledge, who also are good communicators, are in deep demand in investor relations (IR). Some make the mistake of thinking that IR isn't an overly interesting pathway and doesn't involve really "being in the market". For many IR roles, that couldn't be further from the truth. In IR you are critical to ensuring that investing professionals have the capital and support from their investors they need.
Also, many leave IR for more dedicated fund raising roles later in their career which can be wildly lucrative (as you take a small percent of the total amount raised).
For those in sales, IR is quite a common exit option. It's generally less stressful, with better work/life balance, but comes along with great upside compensation.
Product Management
Product managers whether in fintech or traditional tech are a reasonably common pathway for those looking to get out offinance and take a more "corporate" role. While a decade ago this likely would've meant taking a significant cut in your compensation, these days tech product managers (PMs) often make as much or more as those in investment banking or sales and trading.
The reason why many firms like hiring former traders or sales people is that a PM role requires having a number of different skills. Rarely are you expected to be a great programmer (outside of a few tech companies), but instead you're expected to be a good communicator, very driven, and be able to keep a project on the rails.
With the rise of fintech, there are lots of firms who also value people who have some understanding of how the inner workings of the market operate (which, to those who have never spent anytime in finance, can seem entirely foreign).
Crypto Trading
Whatever you may think about crypto as an asset class, it has grown immensely over the past five years with large swaths of institutional capital flowing in. Many in S&T have left to join startups or hedge funds focused on crypto trading. Not necessarily because they believe in it philosophically, but because they see a young market that hasn't developed the kind ofinstitutional infrastructure that dominates most large asset classes you find on the trading floor.
Perhaps the most prominent example is Fred Ehrsam -- a co-founder of Coinbase, which recently went public. Fred worked at Goldman on the FX desk for a few years after graduating from Duke and then was responsible for setting up the exchange platform and some of the side prop trading that occurred in Coinbase's early days.
Another recent example of someone even younger who jumped in was Sam Bankman-Fried, who worked at Jane Street after going to MIT.
Right now there's a huge demand for traders (and for sales people in more corporate roles) in the crypto space who have the pedigree of coming out of a major bank. Startups tend to care less about what desk you came out of, but do like those who came from FX, equity derivatives, or anything flow-oriented or complex. I can personally attest to knowing many (close to ten people, probably) who have left S&T to go the crypto route.
Regulatory Roles
A less common pathway is to move from sales and trading into a regulatory role at the SEC, CFTC, or even the Federal Reserve (in the Trading and Capital Markets Division).
The reality is there's an incredibly amount of regulation involved in sales and trading and there are interesting nuances to each asset class. Some regulatory roles are incredibly interesting and come along with the steady guaranteed pay of the federal government.
I doubt anyone joins a major investment bank in S&T thinking about becoming a regulator later in life, but as you mature into the industry you may find that the incredibly complex job of writing and enforcing regulations is more interesting and rewarding than you'd think. It also provides a great work life balance, which as you get older can become increasingly enticing.
Middle Office Roles
Finally, a small fraction of those in sales and trading want to shift to having a better work / life balance, but don't want to leave the comforts that come along with being at a large investment bank.
These folks will often move to middle office roles that serve the front office (those in S&T) and handle things like risk, clearing, and compliance. Those who go into middle office roles often do so because they've found their priorities have changed as they've gotten older (e.g., wanting to have a more flexible job so they can be with their family more).
Because moving from the front office to the middle office is viewed as being a step down (in terms of compensation), it's not a difficult switch to make if you request it. Even though compensation is less, these are still absolutely vital roles within any bank and compensation will be quite high relative to other more traditional corporate roles (just not what you would have made in the front office).
Summary of S&T Exit Opportunities
The trading floor holds a number of wildly divergent seats - from equity derivatives trading to investment grade bond sales - and this divergence is mimicked in the exit opportunities available.
Hopefully the exit opportunities listed above give you a general idea of what to expect.As you've likely guessed, most people either stay inS&T, move to a buy-side role, or go and do something entirely entrepreneurial once they've saved a bit of money.
I know that many undergrads looking at sales and trading get a bit paranoid about the diversity of seats on a trading floor and the diversity of exitopportunities that exist depending on the seat you ultimately take.
It's certainly true that the "golden path" of doing two years in banking, two years inprivate equity, and then going and getting an MBA at Harvard or Wharton is a much more predictable pathway. But as I said at the outset,you need to assess whether this pathway would really lead you to being happy. I know many who have roughly followed this pathway and they are (to put it mildly) not happy.
By doing S&T you'll have a great name brand on your resume, almost certainly end up growing to love the asset class you're dealing with, and find that ad hoc opportunities end up flowing your way. And, if all else fails, you can always suck it up and try to lateral into an investment banking role after a few years if you really want to (and in this hot hiring market, finding a seat in IB coming from S&T won't be too difficult).
Hopefully this has been helpfuland best of luck if you're gearing up for recruiting. If you're looking for lots of interview questions, be sure to check out the prep guideor the list of I put together.Creating this site has been a passion project of mine and it's been really rewarding to see it help those looking to break into the industry.
