What is a Sales Trader? Here's What You Need to Know
One of the best aspects of sales and trading is that it's always evolving. New desks are being created, new clients are being served, and new opportunities open up for those looking to break into the industry.
Around a decade ago, the sales trader role didn't exist. Instead, when you entered onto the trading floor of any prominent investment bank (like Goldman, JPM, etc.) you'd find three primary groups of people: traders, sales people, and quants.
However, as I've written extensively over the past year, the lines between all of these roles have started to bleed together a bit. For example, on desks that deal with quite complicated products - like equity derivatives - you'll find some traders who kind of look like quants as they'll be spending a lot of time staring at lines of code (because they're pricing up a thorny transaction for a client or because they're trying to get a better understanding of their underlying risk).
The role of a sales trader typifies this bleeding of the boundaries between sales people and traders on certain desks. It also opens up an opportunity for people who don't view themselves as being pure sales or pure trading types (e.g., those who like the idea of handling their own book, but also enjoy talking to clients).
On This Page
Since so little has been written on what a sales trader does, in this post I'm hoping to clarify what they do and whether the role could be right for you. I've written quite a bit here, so you can use the links below to jump to a certain section.
- What is a sales trader?
- What desks have sales traders?
- What are the characteristics of a sales trader?
- Sales trader salary and bonuses
A sales trader manages a book of risk themselves, while also interacting directly with clients. Generally sales traders deal with less complex types of products within an asset class (e.g., vanilla interest rate swaps) for small clients, while dedicated traders on the same desk will handle more complex or larger trades.
As the name implies, sales traders are required to wear multiple hats. In years past traders exclusively managed risk, while sales people exclusively managed client relationships. So, a client who wanted to do a trade - say an equity derivatives trade - would call up the sales person they know on the equity derivatives desk and ask for a price on the product they were looking to trade. Then the sales person would ask the trader, the trader would give a price, and the sales person would communicate that price to the client (who either accepted it, rejected it, or said they'd call back to confirm).
To be clear, the vast majority of people on the floor are still either traders - who have minimal interaction on the job with clients - or sales people. However, over the past ten years it's been recognized that for some types of smaller and less complex trades there's no need to have a dedicated sales people and traders.
Instead, a sales trader will talk with a group of clients that they cover throughout the day (on Bloomberg and by phone). Clients will then tell the sales trader what they want to do, and if it's within their purview the sales trader can give them a price and execute the trade right away. However, if the trade is a bit larger or more complex they may interface with a trader and, if the trade is done, the trader will likely be the one placing the risk on their own book.
Note: Some sales traders will not have a book of risk themselves. Instead, they have the ability to execute traders - that are below a certain size limit and not too complex - but the risk stemming from those traders will be placed on a centralized risk book (or that of an individual trader). Some sales people - who don't have the title of sales trader - also have this capacity as well.
Every bank will have a different philosophy when it comes to creating sales trader roles. However, where you're most likely to find sales traders are on desks that have significant flow and that have some relatively simplistic products (by simplistic I primarily mean easy to price and easy to hedge).
So, for example, it's not uncommon to find sales traders in areas like equity derivatives and rates trading (along with dedicated sales people and dedicated traders). Further, there are several desks in equities - like Delta One and cash equities - where almost everyone is functionally a sales trader (meaning they're dealing directly with clients, executing transactions, and managing risk themselves).
Ultimately, whether or not a bank creates lots of sales trader roles boils down to a bit of a philosophical choice. Would you rather have people on a desk who deal exclusively with managing clients and others who deal exclusively with executing trades and managing risk, or would you rather have some people who do both for trades that are a bit smaller and involve less complex risk?
There's no right or wrong answer. But certainly over the past ten years there has been movement towards having more "generalists" who can perform both the sales and trading functions. In fact, some banks have created dedicated desks - often called something like cross asset desks - to handle simpler trades across asset classes where most on the desk are sales traders.
The reality is that the vast majority of those who enter into S&T want to end up in a trading role. However, this doesn't come as a result of deliberate thought and consideration. Instead, people gravitate towards a trading role because they assume that's the most prestigious thing to do, or what will end up paying the most (because they don't understand how the compensation on the sales-side of sales and trading works).
I think that the vast majority of people - unless you're quite quantitative or are a bit socially anxious - would be best suited for a sales trader role. You get all the benefits of doing trades yourself, but at the same time have a bit more of a social connection with clients.
Certainly it's true that as a sales trader you're going to be a bit of jack of all trades. You'll need to stay on top of clients, price trades, execute trades, watch risk, make sure trades clear, etc. Further, clients tend to want to do trades (especially during volatile periods) around roughly the same time. So things can get overwhelming at times with lots of people trying to get your attention.
However, there is something to be said for a job that gives you a more diverse exposure. A sales trader role also allows you to be less pigeon holed. If you can show that you've done a good job, but want to move to a purely trading or sales role then you'll be able to do that (whereas after a certain number of years it's hard to make the transition between a pure sales and pure trading role).
Ultimately, you should look to a sales trader role if you like the idea of executing trades, don't mind dealing with products that are often a bit more simplistic, and want to directly interact with and manage clients every day.
When it comes to salaries and bonuses in sales and trading, there are two distinct periods. The period before your compensation is somewhat tied to the PnL you're generating if you're a trader (or the client flow you're generating if you're in sales), and the period afterwards.
Before your compensation becomes somewhat tied to your actual work activities, the salary and bonus you'll be paid will more or less correspond to what your counterparts in pure sales or trading roles earn. While there's always a bit of wiggle room depending on what desk you're on, how well that desk has done overall, etc. your salary for the first five to six years won't be that much more or less than others.
I've covered sales and trading salaries and bonuses thoroughly in another post, where I go over where we are today for analysts and associates, so you can check that out. For analysts and (most) associates who are sales traders, their salaries and bonuses will be inline with the figures contained in that linked.
However, as you get more senior your compensation will begin to reflect the PnL you're generating and how essential (meaning: replaceable) you are to the firm. One of the benefits of a sales trader role is that because the products traded tend to be a bit more flow-oriented, and a bit simpler, you often begin to trade quite a bit earlier.
But one downside is that often it's viewed that the PnL you're generating comes primarily from the nature of the product, and the bank's brand, not from your work. Basically meaning that someone else could perhaps generate a roughly similar level of PnL, so you shouldn't receive outsized bonuses for performance. So sometimes the share of PnL coming back to you will be lower than it is for dedicated sales people or traders dealing with more complex or less flow-oriented products.
But again I'm speaking in generalities here given the massive diversity of desks that sales traders can be on (and the level of discretion they have, the scope of clients they deal with, the size of trades they do, etc.).
Over the past ten years the number of sales trader roles has expanded rapidly. This largely reflects the desire of banks to streamline the process of executing trades for clients.
While many come into sales and trading wanting to just be a trader, part of the reason why I created this site is to show the diversity of roles that exist within S&T that are equally interesting (but spoken less about online).
If you're someone who sees the merits in both a sales role and a trading role, then being a sales trader (as the name implies) is likely an ideal place to land. If for no other reason than that it gives you optionality and will allow you to pivot to a pure trading or sales role after you've gained some experience and figured out what you like best.
Of course, the way you land a sales trader seat at a major investment bank is through the general sales and trading pipeline. So if you're currently gearing up for interviews, be sure to check out the long list of sales and trading interview questions I put together (or there's also the sales and trading prep guides that contain hundreds of interview questions and answers).
Hopefully this has helped clarify a bit about what a sales trader really does. If you enjoy dealing with people - but don't want to be exclusively talking with clients all day - then it's a great place to begin your career.