What to do if you're a trader in investment banking facing potential extinction? Can't code? You may be increasingly marginalised and open outcry traders have long moved on to other vocations.
“In my 21 years working in recruitment this is a problem that has stumped me – trading is a unique skill and not readily transferable,” said Peter Laughter, the CEO of Wall Street Services, a recruitment firm. “Many former traders find other venues that can deploy the same skills but, truth be told, it is a difficult transition.”
So if you’re a trader looking for work, where do you go from here?
Obviously, it’s easier said than done and not possible for everyone, but starting your own firm may be your best option if you can swing it.
“If you have an investment strategy that you believe has the ability to capture untapped alpha in the marketplace, you can attempt to raise funds and start your own fund, although both are challenging in this environment,” said Anna Shtromberg, a principal at ViableMkts and a former director, credit trader and senior portfolio manager at National Australia Bank.
Daniel Gramza is a trader, the founder and president of Gramza Capital Management and a trading coach and consultant for hedge funds and other financial institutions. He doesn't buy the line that traders’ skills aren’t transferrable.
“My feeling and experience is that traders in investment banks have numerous skill sets that can be utilized in other positions,” Gramza said. “They may decide to use their trading skills with proprietary trading firms, buy-side institutions, corporate hedging departments and trading desks at financial banks.”
Investment banking traders making the switch over to the buy side can become an execution trader or head up an execution team at an asset management firm, according to Shtromberg.
“Eventually, down the road once traders have proved their performance on execution they could certainly move into a portfolio manager role, or even be hired as a PM to start off, depending on their background,” Shtromberg said.
If you’re a trader at an investment bank and you have had a good amount of contact with professionals on the buy side, you can move into sales or relationship management, Shtromberg said.
Investment bank traders are a good fit for servicing and sales to a bank’s corporate or asset management customers, Gramza agreed.
Traders and structurers with deep knowledge of financial products are moving into complex risk management roles.
“These are very helpful skill sets to mid-office and back-office operations, because they have an appreciation of why the front office may make certain trading decisions,” he said. “This understanding can be key and not only the management of mid- and back-office systems, but also in the design of these systems.”
Regulators are also very interested in traders with experience, Gramza said.
“They can be key to identifying weaknesses at an institution in a field audit or reviewing information that has come back from a field audit and as an expert witness if a case goes to trial,” he said.
This has a higher degree of difficulty, but traders have broken into private equity before.
“It depends on what area of the sell side you were trading,” Shtromberg said. “If you were trading investment grade or high yield, difficult, but if you concentrated on the distressed part of the market, private equity would certainly be an option
Neither management consulting nor professional services would be an easy shift for a trader, but it’s certainly possible.
“If you’re a phenomenal trader but more quant- or research-oriented, it wouldn’t translate well,” Shtromberg said. “It depends on skill set of individual, but certain former traders would do well in management consulting or professional services.”
Senior traders have been starting their own fintech firms for years now. Obviously it's a hot area, but how many good jobs are there?
“A lot of people would like to make that switch to fintech,” Shtromberg said. “You would need to be experienced in that area enough to be impactful – you would have needed to be exposed to different fintech platforms.
“As a sell-side trader, you’d need to know the backbone of the platform and what makes it up, or you could partner with people who have direct work experience with that,” she said. “The institutional side of fintech is definitely an area many people feel would take up the slack as the sell side is shrinking.”
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