What makes someone a star at an investment bank or trading floor? How could one become a star?
The term “investment bank” is used in a lot of ways. I’m going to focus my response on what makes and “investment banker” a star. An investment banker is someone that advises CEOs, CFOs, and Boards on strategic matters. My comments are about senior bankers (i.e., Managing Directors), rather than junior ones.In this part of Wall Street organizations, what differentiates one banking professional from another are two things: content and relationships. With respect to the former, you cannot dispense high quality strategic advice if you first don’t know the client’s company, competitors and industry dynamics as well as the client. With regards to the latter, if you’re not the first call from a client when the company is thinking about a strategic transaction (M&A or capital raise), you’re not what I would call a “trusted advisor.” That means you’re unlikely to win mandates (at least the ones that move the needle from a revenue point of view).CEOs, in particular, have a lot of people around them and they all have an agenda. Being able to filter through the noise and debate ideas with someone that is an expert on their business and industry— and outside his or her company — is hugely valuable.The best bankers, in short, are able to solve strategic problems of their clients. They get awarded mandates and they get the lion’s share of the fee pool.I was a FIG banker for a long time before founding a venture firm. Back in the day, the very best banker in our industry, IMHO, was J. Christopher Flowers, who created the Financial Institutions practice at Goldman Sachs. (Chris was made a partner at GS at 28 or 29.) Competing against Chris was no fun. All of the senior bankers on other teams lamented that he seemed to know every CEO and was on a different intellectual plane from the rest of us.The best junior FIG banker in the industry was a friend of mine at our firm — David Schamis. While he did not yet have the relationships, he had an intellectual toolkit that even Chris respected. (It was really humbling working with Schamis. What took me hours to complete took him minutes.)Thankfully, Chris left the industry to build his own Private Equity firm and hired Schamis as his first partner. That allowed a few of us to win some deals in their absence.
Do traders usually make more than investment bankers?
While there may be exceptions and special situations, in general traders stand to make more than investment bankers. Even with reduction in force and other things in the post 2008 world, major financial institutions like Goldman Sachs, JPMC and numerous hedge funds, rely primarily on their prop. trading activities for up to 75% of their profits. This speaks for itself.Traders take more risk and their job every year essentially depends mainly on their annual P&L. So they get highly rewarded for it.Investment bankers are essentially glorified sales people that get paid to schmooze sell and close IPO, M&A and other type of deals, which are done using standardized boilerplate forms and spreadsheets most of the time. So the main job is “Sales” as the other stuff is fairly standardized and does not change too much.Even though some times Traders work in a team at a Desk, ultimately each trader’s performance stands on its own and adds or subtracts from the Desk. And there is no boilerplate or standardized way to deal with the market ups and downs. Traders have to be on their toes and alert at all times. Or they could literally lose their jobs.Consequently a good individual trader can out earn (by an order of magnitude) an IB with an “organization” of 50+ people reporting to them.Financial markets and especially trading is essentially an every day battle for money. And IB’s are more like diplomats / politicians, who work fairly safely and are compensated accordingly lower. Traders are more like the marines that live or die on the battlefield and are compensated accordingly higher.Come to think of it, its pretty ironic that in the “real world” it works exactly the opposite. (where politicians/diplomats get compensated much higher for taking less personal risk). But that’s for another time…….
If I work for a financial firm am I allowed to trade on the stock market still? Is that considered insider trading if it's your own account?
No, you won't be allowed to trade if you work for a financial firm. Although you can do investments that too comes with a lot of restrictions like the trading account has to be opened with a preferred broker and you will have to declare that with your firm. You have to ask for approval before buying or selling particular stock and after buying you have to hold it for certain period which may be a month to six months (even when you know it's gonna fall, you can't do anything) depending on your role and regulatory policy applicable(Multinational companies have to follow policy of the country they are listed in as well policy of the country you are working in and/or working for) on the firm.These regulations exist so that the market is fair and you can't use clients data to trade which is called insider trading.
Why do traders in investment banks feel their jobs are immune from AI, automation, and deep learning?
Why do investment bankers feel their jobs are immune from AI, automation, and deep learning?The reason for the is one of the most critical skills of a good investment banker that separates them from the rest. And it has nothing to do with any advantage over computers or AI whatsoever.Risk assessment.People are very, very bad at assessing risks and tend to overreact. If someone writes a post about an evil AI that outperforms humans in picking up women by 420%, tomorrow there will be riots. Even if by picking up they meant lifting them in the air. Nobody will even think about why robots would be hitting on women in the first place. How do the guys who earn millions react differently?They know how to calculate risk. Are robots better in trading? Hell yes. Even now. Did it put traders out of the job?Will robots be better in investing some day? Most likely. Is it going to happen in the nearest years? No.Investment is a long-term relationship. It’s a pact. I give you money to you so that you could grow and bring back more money. It’s a complicated process that involves thousands of factors, most of which are based on assessing the team and their competitors. People (Tim Gouskov gives an excellent answer about it). It’s a little bit more complicated that putting their height and weight into regression model. Okay, Google, are these guys capable of delivering the product to the market in the next five years while attracting customers and not losing their key people to big companies? What? I don’t hear you...Statistical learning methods don’t have motivation. To start making money they need a person who presses the button. Do you know what they call a guy who would totally press the button on a money-making machine if he could? Investment banker.Worst case scenario, there will be fewer bankers. They will probably be more mathematically inclined. The decade when it happens is still unknown. Does it sound like a problem for someone whose main personality requirement for the job is willingness to take calculated risks?
I want to start investing. How much money (if any) should I invest with a financial planner/private wealth firm? What other options could I explore?
Now that you posted that on a web site you will probably have any number of dimwits coming at you promising you anything you want to hear. Avoid them like the plague.So you have choices.You could give it to a money manager but most of them are snake oil salesmen. The only two I know that are completely honest are Ritholtz Wealth Management (Josh Brown) and Ciovacco Capital (Chris Ciovacco.) You can google them and have a chat.Another choice is to begin learning how to invest for yourself. But make no mistake it will take at least 10 years to become competent. Read the book “Super Trader” (worst title for a book ever) by Dr. Van Tharp. This book will give you a pretty good idea of what you are in for and a primer on how to begin.There’s a pretty good guy on this site, Cody Shirk. He seems to have his finger on the pulse of how this game is played and doesn't seem to be trying to sell anything. Give him a follow/read.There’s also real estate or opening a business. But you really need to tell us a bit about who you are, what do you want, do you have a job/career, what are your dreams, etc. for anyone to even begin to advise you.In the mean time you see the 1st line of your post “21 & Inherited AUD$850,000.”This is a public website. Keep it to yourself!!!!!!!!!!!
How does one become a hedge fund manager?
I'm on my phone so please excuse the brevity. And please don't take this as career advice. It's a lot harder than its going to sound like here; I'm just trying to highlight some of the prerequisites.Hard skillsThis depends a lot on the type of fund manager you want to become. If you're looking at longer term value or global macro investing, you'll generally need:a degree in business or economics.a CFA Some kind of course in accounting or financial statement analysisprevious experience as an institutional account advisor or a successful mutual fund portfolio managerIf you're looking at quant funds, then you'll need:A degree in finance/financial economicsa very strong knowledge of math, statistics and probability FRM works better than CFA in this case Knowledge of programming languages like Python, R and .NET Knowledge of basic tools like MATLAB, Mathematica and SPSS A strong understand of financial theories like CAPM, Modern Portfolio Theory etc.A working knowledge of market microstructure previous experience as a successful trader or portfolio manager Soft skillsApart from normal stuff such as being a great team player, likeable personality, analytical mindset blah blah, some specifically desired traits are:Not projecting stress. If you're losing money, you have to handle it yourself. You Co workers won't be around consoling you for long. No one likes a loser.ability to not get overwhelmed by information overload.ability to fire underperformers.Being humble. If you're on a winning streak and very vocal about it, your peers might get jealous and start disliking you.Being not very opinionated. Strongly opionated people tend to base their decisions on intuition or experience rather than data. This works for Warren Buffet because he's a genius, doesn't work for most people.
What is the difference between traders & dealers?
Broker vs DealerBrokers and dealers are terms associated with securities. Though both have almost the same work, they are different in many aspects. The main difference between a broker and a dealer is in respect of their role in the market, as well as the capital required. A broker is a person who executes the trade on behalf of others, whereas a dealer is a person who trades business on their own behalf.A dealer is a person who will buy and sell securities on their account. On the other hand, a broker is one who will buy and sell securities for their clients.When dealing with securities, dealers make all decisions in respect of purchases. On the other hand, a broker will only make purchases as per the client’s wishes. While dealers have all the rights and freedom regarding the buying and selling of securities, brokers seldom have this freedom and these rights.When talking about their experience, a broker has only a little experience in the field compared to dealers. It has also been seen that brokers become dealers once they get experience.A broker is normally paid a commission for transacting the business. Brokers do not have any assets, but only act as middlemen between sellers and buyers. On the other hand, a dealer is not paid a commission, and he or she is a primary principal. Dealers will have assets of their own which they sell at a later stage.Brokers and dealers have to adhere to certain guidelines and regulations. Both brokers and dealers have certain financial responsibilities.Summary:1. A broker is a person who executes the trade on behalf of others, whereas a dealer is a person who trades business on their own behalf.2. A dealer is a person who will buy and sell securities on their account. On the other hand, a broker is one who will buy and sell securities for their clients.3. While dealers have all the rights and freedom regarding the buying and selling of securities, brokers seldom seldom have this freedom and these rights.4. A broker has only a little experience in the field compared to dealers. It has also been seen that brokers become dealers once they get experience.5. A broker is normally paid a commission for transacting the business. A dealer is not paid a commission, and he or she is a primary principal.Open an account with the best broker now!Try Swastika Investmart Ltd to manage your Wealth Profile. Click here to open an account or feel free to Contact Us