Every day, millions of financial products are traded in the secondary markets, where traders buy and sell financial products after their initial issue. (That happens in what's called the "primary market.") In the secondary markets, salespeople advise clients on investment opportunities, while traders carry out the actual buying and selling of securities.
Salespeople spend the bulk of their time working the phones. They call clients from the moment the financial markets open until the moment they close, as well as for several hours before and after. Clients might be high-net-worth individuals, pension fund managers, other institutional investors or corporate finance directors. Ultimately, salespeople take orders for financial products and communicate them to their trading desks for execution.
Salespeople have to be charming and persuasive - in short, they need to be good at selling. Shrinking violets need not apply. As a rule, their clients are knowledgeable and sophisticated buyers of financial products. However, no individual can be familiar with every possible investment product, from stocks and bonds to derivatives like interest rate swaps or credit derivatives. It's the salesperson's job to introduce new opportunities to customers, as well as to keep them informed about changing conditions that might affect the value of securities that are already in their portfolio.
Sales professionals typically start their day by reviewing financial publications like The Wall Street Journal, along with reports from their research staffs. They also listen in on morning conference calls conducted by their research departments, where they learn of upgrades or downgrades to securities already covered, or of new issues being added to the coverage list. All of this material becomes fodder for the day's sales calls.
And just because the markets close doesn't mean the salesperson's day is done. Many say the couple of hours between the close and when clients start heading for home are the best time to discuss strategies in detail. After that, there are the dinners and entertainment with clients that can stretch well into the evening hours.
Traders are the people who actually buy and sell products on the secondary markets. They must make snap decisions that can involve millions of dollars and earn substantial profits in the process.
If you work as a trader, you'll have to be at your desk before the markets open. You'll spend the rest of the day sitting before an array of computer screens in the company of scores of other traders on the trading floor. The screens are a window into the financial markets, showing movements in the prices of stocks, bonds, commodities and other financial products, as well as real-time news and research reports. At the touch of a button, traders can buy and sell the products whose prices they're tracking.
How trading desks make money - and how they make hiring decisions - differs with each financial product. In recent years, trading of fixed income products, derivatives, energy and physical commodities like metals has been booming. On the other hand, the ranks of equity traders are being reduced as their jobs are replaced by electronic systems that trade more quickly and efficiently.
In between salespeople and traders exists a hybrid: the sales-trader. Like salespeople, sales-traders call clients to recommend securities. Like traders, they trade the securities once a sale has been made. However, as more clients rely on electronic trading platforms, sales-traders are becoming less numerous on the biggest banks' equity desks.
Firms - particularly larger investment firms - also employ research-sales professionals, whose job is to sell their employer's research expertise. While investment sales professionals and sales-traders will use the bottom line results of a research report to pitch actual investments, research salespeople must be intimately familiar with the details of the analysis to be successful.
Roles and Career Paths
Traders and salespeople can be categorized according to the products they trade, by the types of clients they sell to, or by the sector they specialize in. For example, traders might focus on foreign exchange, derivatives, corporate bonds, government bonds, or any number of other products. One salesperson might sell equities to pension fund investors, while another might focus on corporate bonds.
In addition, there are two fundamental types of trader: proprietary traders and flow traders. Most traders are flow traders, who buy and sell financial products on behalf of an investment bank's clients. Salespeople tell flow traders what their clients want to buy and sell. In turn, flow traders tell salespeople whether a particular trade is possible at a particular price. Flow traders can also help guide salespeople by keeping them informed of trading strategies and the direction a market is headed in.
Once a client agrees to buy an instrument, flow traders are obliged to make the trade at the price the client has agreed to. If they don't act quickly and the price rises, they will have to sell the products to the client at a loss. On the other hand, if traders buy at a price lower than what was quoted to the client, the firm makes a profit.
A group of elite traders work on behalf of the bank. These are the proprietary traders. They can make huge profits - or considerable losses. It takes a stout heart and considerable self-confidence to be a successful proprietary trader, but if you're a good one the rewards can be substantial.
Skills and Qualities
- Outgoing and self-confident
- Ability to grow and maintain client relationships
- Excellent communication skills
- Ability to understand complex products
- Passionate about financial markets
- Can function well under pressure
- Comfortable with numbers
- Ability to think on your feet and react quickly to changing market conditions