Sales and Trading

Sales and Trading

Industry Outlook

After basically minting money for decades from the buying and selling of bonds, currencies, and other financial products, earnings at investment banks decreased significantly through the end of 2019. Total 2019 revenues at the 12 top global investment banks were $147.5 billion, down from $151.4 billion in 2018, according to Coalition, a London-based research firm. The 2020 COVID-19 pandemic triggered a surge in stock market volatility and increased revenues to a five-year high, but the long-term performance of the financial markets is uncertain due to the pandemic and other developments. Factors that have reduced profits in the investment banking include:

  • The potential for increasing regulation (although the government is currently loosening components of Dodd-Frank, allowing some investment banks to engage in previously banned activities, such as proprietary trading, that will allow them to increase profits).
  • Advances in technology, which allow securities owners to trade directly with one another (cutting investment banking sales and trading departments out of the equation).
  • Competition from brokers, hedge funds, and other financial firms that offer the same services as investment banks, but more quickly and at a lower price.

These factors—and the increasing use of automated trading and artificial intelligence—have caused steep declines in the number of sales and trading professionals. In fact, 7,300 front office positions were cut at the 12 of the largest investment banks from 2014 to 2019, according to the consulting firm Coalition Ltd. This was an employment decline of more than 13 percent from 2014 to 2019.

The rollout of the COVID-19 vaccine in 2021 is expected to strengthen the economy, and investor uncertainty will decline. According to market research group IBISWorld, revenue for the securities brokering industry is projected to increase from 2021 through 2026. Industry growth is projected to be driven primarily by "wealth management services as asset-based fees represent a less volatile stream for industry operators." A J.P. Morgan report estimated that in 2021, the gross domestic product growth will be 5.8 percent globally, and 5.5 percent in the U.S. Stabilization is expected in 2021 as distribution of the vaccine accelerates and the economy recovers. The report predicts "recovery, relation, and rotation against the backdrop of accommodative monetary and fiscal support will set the backdrop for key market and economic calls for 2021."

Employment of securities, commodities, and financial services sales agents (including investment banking sales agents and traders, but also many other types of investment industry professionals) is projected to increase by 4 percent from 2019 to 2029, or about as fast as the average for all occupations, according to the U.S. Department of Labor (DOL). However, the DOL predicts that “continuing consolidation in the financial services industry is projected to slow employment growth for these workers over the next decade. In addition, automated trading systems have reduced demand for securities traders. Because simpler stock purchases can be made online without a broker, financial firms will focus on hiring sales agents with specialized areas of expertise and strong customer-service skills.”

Given this information, should you still pursue a career in sales and trading? The answer is yes, but you need to enter the field fully aware of the highly competitive nature of the job search and the rapid changes that are occurring in the industry. Traders will likely want to work in areas where it is difficult to match sellers with buyers. These areas might include illiquid products and bespoke over-the-counter financial products.

Sales workers of the future will transition from being facilitators to generating trading ideas for clients and providing advice to clients to help them make the most effective trades. Many also see sales jobs splitting into “high touch” and “low touch” positions. “High touch” sales professionals will have the highest level of industry knowledge and experience and work with their company’s top clients. “Low touch” sales workers will have less knowledge and experience and work with a larger number of lower-level clients, often steering them toward their firm’s electronic trading systems.

Technology—artificial intelligence, algorithmic trading, blockchain technology, to name just a few examples—will continue to change the financial industry. “Technology is getting cheaper and the really sophisticated traders are getting younger, smarter, and savvier,” said Michael Spence, the founder and chief executive of the financial technology company NEX Group, in an article in Financial News. “In the future, we will see banks and non-banks poaching the very best from the likes of Microsoft and Google rather than from traditional peers. An expensive race for talent will begin and I suspect today’s classic lifestyle of long hours in an office will start to change. Traders of the future will expect more freedom in how they work, where they work and what they wear to work. It will be the firms that embrace this that win.”

Advances in technology are sometimes viewed negatively—especially if they cause job losses. But a study of financial markets professionals by Refinitiv (a global provider of financial market data and infrastructure) and Greenwich Associates (a global provider of market intelligence and advisory services to the ?nancial services industry) revealed mostly positive perceptions about the affects of technology on one’s career. Roughly 80 percent of respondents said that technology had presented them with new opportunities, and 50 percent said it had accelerated their careers. The lesson to take from these results is that it is better to embrace technology and learn as many new technology skills as possible rather than to have an adversarial relationship with changes brought by technology and shun technology-related continuing education. New technology will drastically changes the financial industry in the next decade, and those who are knowledgeable about programming, artificial intelligence, machine learning, data analytics, and other technology will have the best job prospects.

Salaries for sales and trading professionals have also taken a hit in recent years due to automation, decreasing revenue, and other factors. “Pay cuts have been most dramatic at relatively small Wall Street firms that focus on investment banking, securities trading, and wealth management and lack the large retail operations of rivals,” according to Financial Advisor. Despite this earnings decline, sales and trading professionals still make a lot of money compared to people in most other jobs. Associates in equity cash sales and trading careers can earn $200,000 to $250,000 a year, according to the Options Group, an executive search firm. Sales and trading managing directors may receive up to $1 million in total compensation.

Although the recent deregulation of the U.S. financial sector suggests that job opportunities may improve for sales and trading professionals, the long-term trend is toward fewer jobs due to electronic trading and other factors. But there are other opportunities for sales and trading professionals. Sales workers can transition to jobs in commercial banking, wealth management, and other financial fields, as well as to sales jobs in other industries. Traders in investment banking can find job opportunities with buy-side institutions, in risk management, with financial regulators, at private equity firms, or at management or financial consulting firms. Some choose to parlay their knowledge of trading into jobs in financial sales or customer relationship management. Others earn advanced degrees in computational mathematics, software development, or related areas and land positions in fintech.