The Sales Side of Sales and Trading: What You Need to Know

There is no getting around the fact that there is a stigma when it comes to "sales" roles in general; a view that sales is nothing more than glad-handing and sweet-talking. 

While that may be true for sales in certain industries, when it comes to sales and trading (S&T) the caricature of a typical sales person could not be further from the reality of what a sales person on a sell-side desk is actually like.

In my experience - having done multiple sales and trading internships myself at places like Goldman Sachs and having seen many summer analyst classes come through the trading floor - roughly 80% of interns have their eyes set on trading. 

This is not because of any deep reasoning or introspection on behalf of the summer analyst class (at least, I didn't engage in any of that!). Rather, it's a belief that sales is more apt to be automated than trading, sales is the anthesis of analytical, sales keeps you detached from the markets, and sales will pay less than trading. 

In 2021 and likely beyond absolutely none of those things are true. Indeed, even in the pre-financial crisis era, most of those points were not true. Prior to 2009 - when there was a fundamental reset in compensation and new regulations put in place - senior sales members on desks were as apt to have the stupendous bonuses as traders were. 

What Sales in Sales and Trading is Really All About

Most summer analysts arriving in sales and trading will be able to tell you that the fundamental job of a trader is to manage a book of risk. What most summer analysts arriving in S&T won't be able to tell you is the fundamental job a salesperson.

The reality is that the fundamental job of a salesperson in sales and trading is to manage a book of clients (which is a great line to use in a sales and trading interview, by the way). 

What this means in practice is that all senior S&T people on the sales side will have a set of clients that they are in communication with at least weekly, but usually daily. 

The role of a sales person is not to simply relay the orders of the client to the trader. Logically, this should be obvious. Why would a bank pay a sales person handsomely if all they do is relay orders from the client to the trader?

The role of a sales person is to keep in communication with their clients and understand what their "axes" are. In other words, understand how they think about the market, what they are looking to do in the market, offer their own perspective on what activity they've been seeing in the market, and then get orders from the client that the salesperson works with the trader on executing at the best price possible. 

On a flow trading desk, this can involve having multiple conversations a day with traders at hedge funds, pension funds, etc. who are doing lots of trades daily (this would be the case on a treasury trading desk, for example). 

The clients may call up with a specific order in mind - for example, wanting to buy $100mm of 10-year on-the-run Treasury Notes - or it may be because they want "market color" (they want to know what the sales person has been seeing in the market, given that they're watching the markets and clients trading all day). 

On desks that sell more illiquid products, like certain kinds of equity or credit derivatives, the client may call because they'd like a price on a certain bespoke structure. The sales person will then be responsible for quickly talking with traders, structures, and/or quants in order to price up this bespoke structure in order to give a price to the client. 

In reality, while the work of a salesperson may be less technical than other roles within sales and trading the salesperson is at the beginning of the bottleneck. The flow of the desk goes through them. 

Part of the reason for the large compensation that sales people on the floor earn is that clients will travel with them if they leave the bank to a competitor. This is because they trust the sales persons judgment on the market, trust their ability to get them fair prices, and generally feel like they have a frictionless relationship (as much as you can have in the markets when dealing with esoteric products or large sized trades).

Common Misconceptions About Sales in S&T

In the introduction I laid out a few common misconceptions that we'll revisit in this section.

Misconception #1: Sales is More Apt to be Automated Than Trading

Sales and trading is an incredibly diverse division of an investment bank being comprised of dozens of different desks so making any generalizable statements here is a bit foolish. 

However, it is important to note that one of the side-effects of the regulations that have come in post-GFC is that traders have much less discretion in what they keep in their books. While traders still have the capacity to have out-sized profits - and thus out-sized bonuses - if they are great at their job, the discretionary element of their job has definitely been hindered relative to the proprietary trading days before the Volcker Rule

Sales people on the other hand have not had their roles changed by regulation. Rather, so long as clients feel the need or desire to talk to sales people then sales people still have value to the bank.

For certain flow desks - like some in FX - clients are more than happy to send their orders directly to a trader (or algorithm) at the bank. However, for many desks that are both flow and bespoke, clients still value getting insights from sales people, having them price bespoke securities for them, and having a "point" person at the bank to deal with.

Another incredibly important point to note is that sales people are very much the face of the franchise in S&T. That comes along with great responsibility. 

Misconception #2: Sales in the Anthesis of Analytical

When viewed next to traders, structures, and quants, it's certainly true that sales is the least analytical role. 

However, it is the role of a sales person to deeply understand the product being traded in order to talk to clients, provide them insights, and know why the trader is pricing things where they are.

Further, for more bespoke products, often it will be the sales people themselves running the models (developed by the structurers or quants) for the client in order to provide an indicative price quickly. While the risk from a transaction is then shifted to the books of a trader, it's still true that the sales person must know what risk they are placing on the books of that trader!

Note: The sales and trading interview questions you should expect for a sales role are no different than in a trading role if you're joining the S&T summer analyst program of any sell-side bank (like Morgan Stanley, RBC, Barclays, etc.).

Misconception #3: Sales Keeps You Detached From the Market

This couldn't be less true! The reality is that no one arguably is more in touch with the flows within the market than a sales person. They are the ones talking on the phone, instant messaging, or going out to dinner with clients constantly.

They are seeing what flow is happening and more importantly what flows are not happening. One of the roles of a sales person will be to call clients to "catch up" and see why they aren't involved in the markets during a certain period and relay that "color" to the traders.

Misconception #4: Sales Pays Less Than Trading

As mentioned earlier, this is particularly less true in the current regulatory environment we're in.

In this current environment we're in it is the traders who have less discretion on the sell-side in building up large books or having excess inventory in certain securities due to their personal beliefs on the value of those securities going up.

Ultimately, sell-side banks today are first and foremost market makers and that means that clients need to be coming into the bank and transacting! It's the role of sales people fundamentally to bring them in, which is what makes them so essential. 

If simply providing the best prices and the best execution were enough, then sell-side banks would have gotten rid of sales people decades ago. The reality is that those things are important, of course, but it doesn't make up for the need for sales people to be out getting clients to come to the bank to trade.

The Attributes of a Great Sales and Trading Salesperson

One thing I believed when I first got on a trading floor is that in order to be a successful sales person in sales and trading you'd have to be gregarious, outgoing, and a bit of a glad-hander. 

While there are certainly some sales people in investment banks who fit that mold, in my experience most don't.

The reality is that most sales people are a bit more extroverted than traders - which often isn't saying much - but are really people who are deeply knowledgeable about markets, have high level views and thoughts about future market movements, and enjoy talking to people.

If you enjoy talking about markets, but don't consider yourself to be extroverted, don't dismiss sales as a role for you. Remember that clients are ultimately looking for sales people to give them insight into the market, share interesting bits of information with them, and get them the best prices possible.

None of that requires you to be extroverted, per se. What it requires is for you to be articulate, have defined views, be able to communicate clearly, and work with other members of your desk in order to deliver the best possible experience for the client.

Conclusion

At the outset I mentioned that in my experience over 80% of the summer analyst class get into sales and trading wanting to be traders. 

This doesn't come from any deep understanding of what sales and trading is all about or what their personality-type is, it comes from an ignorance as to what sales in the S&T context is actually all about. 

Fundamentally, sales is about working with clients to bring in trades (flow) to the bank. This is accomplished by "managing clients" in much the same way as traders manage a book of risk.

Further, senior sales people are compensated not by some hand-wavy metric, but rather by the amount of flow they bring in to the desk. Your job as a sales person in S&T isn't to back-slap and ask about the client's vacation plans, it's to provide them interesting market insights and provide them the best possible trade prices possible by working with traders, structurers, and quants depending on the desk you're on.

Sales is a fantastic career path within S&T and easily transferable to other areas like tech (enterprise sales), which is a similarly misunderstood, but highly lucrative field. 

Don't overlook sales because of caricatures of sales people or cliches you've accumulated. Sales within sales and trading is one of the best places in finance to begin your career from a work / life balance and compensation perspective (most find it to be a lot of fun as well).

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