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January 14, 2013

Sales and Trading a Dwindling Career Choice for Booth Students

By Aaron Toomey '14  |  january, 2013, Issue 1
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Chicago Booth Sales & Trading Intern Hires, 2007-2012

Chicago Booth and its students are not immune to the cyclical and structural changes that have been affecting the finance world over the past several years. Nowhere is that more clear than in the world of sales and trading, where both student interest and recruiter demand has declined significantly since the financial crisis hit nearly five years ago. This year a number of banks canceled their on-campus recruiting for sales and trading positions.

Banks, facing mounting pressures from regulatory changes and market forces, have vastly scaled back their sales and trading operations. Late last year UBS announced plans to lay off 10,000 employees, essentially eliminating most of its fixed-income business. In December, Barclays made public its plans to eliminate 2,000 jobs, many in sales and trading. In years prior, banks including Goldman Sachs and Morgan Stanley have taken the axe to sales and trading headcount in an effort to cut costs, comply with the upcoming Volker Rule and eliminate capital intensive or unprofitable businesses.

All of this has had an effect on MBA candidates and the careers they pursue. Between 2007 and 2011, intern hiring for sales and trading positions was down almost 62% from 47 hires to 18 last year, for an average 18% decline each year. Sources within Booth's Sales and Trading Group predict that number will fall to between 6 and 10 this year.

"When I was a first-year, we had 40 people attend Global Markets Days," said STG co-chair Bret Feingerts, referring to the early November trip to New York designed for first-year Booth students interested in sales and trading. "This year, there were only seven."

The drop is due to both a decreased demand for MBAs within the sales and trading profession, as well as lower student interest among MBA candidates.

"There is a question about the value (firms) see in the MBA. They still want to talk to MBAs but they aren't concentrating on them as much as they used to," said Melanie Scarlata, Assistant Director of Relationship Management in Career Services.

Banks are "moving toward a more undergraduate focused model" for sourcing talent, focusing more on mathematical and quantitative skills rather than management, said Melanie Scarlata.

First-year sales and trading recruit Julian Gil concurs. "Firms roughly equate undergrad and MBA intern contributions, but one comes at a cost premium over the other," he said.

Some of the shift may be attributed to the type of students Booth is going after, with the school focusing on nurturing programs in entrepreneurship, marketing and other disciplines.

"I definitely feel like this school is diversifying its resources into other areas. They are broadening the type of student they are recruiting," said Mr. Feingerts.

Still, Career Services has been working to persuade recruiters that MBAs can be a significant source of sales and trading talent.

"We are still talking to firms about the value of the MBA and broader skillset MBAs can bring. We think MBAs can still play an active role on trading desks," said Melanie Scarlata.

As firms re-evaluate their recruiting options, they also face strong headwinds in the sales and trading space. The Volker rule, part of the 2010 Dodd-Frank financial reform overhaul, prohibits deposit-taking banks from engaging in proprietary trading, or bets on the direction of securities using the firm's own capital. Details of the rule's enforcement have not yet been finalized, but it is broadly acknowledged that the rule will limit the activities of bank trading desks and may impair profitability.

"Dodd-Frank took away a lot of the human component, which was the analysis that comes with prop trading," Mr. Feingerts said, adding that MBAs will likely be more valuable going forward in sales roles. "It will be rare to see MBAs going into trading from now on."

What's more, banks will face increasingly stringent capital rules as part of the Basel III international capital accord. The new rules will require banks to set aside larger portions of equity capital against trading assets, making those businesses more expensive and less lucrative.

These effects, in combination with the tepid global recovery from the 2007-2008 financial crisis, have put pressure on banks to re-evaluate and scale back their sales and trading businesses.

But not everyone is deterred. First-year David Daniels noted that the pull back in recruiting has been met with an even starker decrease in student interest, leaving those still pursuing the career in a relatively good spot.

"So few people are still recruiting for sales and trading," said Mr. Daniels, "there is still a lot of opportunity."

Mr. Feingerts agrees: "There is still a lot of money flowing through this industry, but no one wants to do it," he said.

According to Mr. Daniels, many first-years are dissuaded from sales and trading because of the nature of the job.

"It's very humbling. You're not managing people, which is what some people want out of their MBA. You can't really contribute much during the internship since you can't sell or trade. That makes lots of people drop out." But, said Mr. Daniels, "This is still an amazing industry that pays very well and is intellectually stimulating. Why would I not take a swing at it?" Career Services' Melanie Scarlata notes that there are alternatives to bulge bracket banks for MBA candidates interested in sales and trading.

"We have been talking about other areas they might be interested in such as prop trading or energy firms with active hedging desks," she said." We want to encourage students to expand how they think about sales and trading."

Last Updated 1/16/13
Last Updated 1/16/13