A choice of three distinct careers

Every day, millions of financial products are bought and sold in the secondary markets where traders, salespeople and researchers in investment banks work together to trade for clients after a security’s initial issue.

In the secondary markets, salespeople advise clients on investment opportunities, while traders buy and sell securities.

The secondary markets are divided into equities (stocks and shares) and fixed income currencies and commodities (corporate credit, government debt, currencies, commodities and interest rate products).

Within the fixed income division is the foreign exchange (FX) team. The FX market is the largest in the world, with an average daily turnover of $4 trillion, according to the latest figures from the Bank for International Settlements.

There is also a range of ‘exotic’ derivative products within all these sectors, whose value depends on the underlying security.

Key players

Roles and career paths

Sales, trading and research are distinct careers. Salespeople advise their clients, who might be rich individuals, pension funds or other institutional investors, when to buy and sell securities.

They usually focus on particular products (e.g. government bonds) and clients. “Most of the time, we’re selling ‘convenience’ or ‘utility’, not just a product. It’s important to understand what is driving the purchase and add value accordingly,” says Lutfey Siddiqi, head of FICC corporate coverage and FX distribution Asia-Pacific at UBS Investment Bank.

Traders track the markets and buy and sell products at the touch of a button. Your career will be defined both by what you trade (e.g. equities, foreign exchange, or commodities) and by the kind of trader you are. There are several types.

‘Flow’ traders buy and sell financial products for a bank’s clients, while proprietary (or ‘prop’) traders trade the bank’s own money.

‘Execution’ traders place trades for analysts and fund managers, and ‘sales’ traders recommend products to clients and execute trades. There are also sales-support traders who act as intermediaries between sales and execution traders, and develop new business for the bank. They quote prices, take client orders, advise on the timing of the trade and the execution method.

Historically, prop traders were at the top of the trader hierarchy but many banks have reduced their prop trading activities following large losses and regulatory crackdowns.

Research roles focus on particular product types (e.g. equities or company debt) and particular industry sectors (e.g. pharmaceuticals, financial stocks, or leisure companies). Known as analysts, researchers produce reports on the advisability of investing in various asset classes or companies.

Pay and bonuses

Skills sought

Traders need a keen sense of risk and reward, an understanding of the dynamics of the markets and an analytical mind. If you’re trading complex derivatives you’ll need the mathematical ability to understand the products.

If you’re trading non-complex, ‘vanilla’ products, you’ll need to understand what drives the market.

“Traders should have a passion for the markets and an ability to connect the dots across a broad range of data, plus be able to effectively communicate what they see to both clients and colleagues,” says April Galda, managing director, securities at Goldman Sachs.

“The job requires measured yet extremely time-sensitive decision making for our clients, where success hinges on idea generation, client focus, and risk management across the floor,” adds Samantha Huggins, director, pan-Euro sales trading at Citi.

Highly-developed analytical skills are essential for research roles, as is an inquisitive nature and an ability to synthesise large quantities of information and turn it into a linear argument.

Rob Rouse, deputy head of US equity research at Barclays, says that analysts must have: “An internal drive to always be asking ‘Why?’ and ‘Is that the complete picture?’ – ‘Is there another approach to be considered?’ And in the pursuit of this information, always be open to new perspectives and consideration of data that might conflict with your existing views on an issue.”

Understandably, if you have a desire to work in sales, it’s safe to say you shouldn’t be a shrinking violet. “It helps to be thick-skinned and able to keep at it in the face of rejection. Only a minority of approaches result in successful sales,” says UBS’s Siddiqi.

What’s more, you need to know how to interpret people: “It’s easy to be intellectually correct but emotionally incorrect. Successful salespeople are able to tune in to the customer’s wavelength, sense the unsaid and contextualise the purchase beyond the logical level,” he says.