| The first thing to consider when looking at | | | | activities such as debating, sports and, of course, |
| becoming a broker is that the role of a traditional | | | | finance related activities will be a plus. |
| stockbroker is almost dead. Low cost online | | | | Taking qualifications off your own back, such as |
| trading sites and cheap 'execution only' services | | | | Securities Institute exams won't hurt and shows |
| dominate the traditional stock broking arena and | | | | commitment. |
| leave little margin for broking firms to make | | | | Getting into advisory roles is probably easier than |
| money. | | | | a prop trading role. Many firms are looking for |
| More diverse instruments have cropped up over | | | | good sales people to market the services of |
| the years such as 'Contracts For Difference' | | | | companies and will train you up on the technical |
| (CFDs), spread trading and other 'derivative' | | | | and broking side of things but existing SI |
| instruments. So becoming a 'stockbroker' is a little | | | | qualifications will give you a head start as no firm |
| outdated, these days you are looking at becoming | | | | really wants to spend six months paying you and |
| an 'advisory broker' or a 'trader'. | | | | training you on the required FSA exams, although |
| The difference between the two is wide. An | | | | if you are a good candidate they will. |
| advisory broker is typically someone who works | | | | If you have no particular qualifications then you |
| within a firm and relies heavily on the | | | | will have to start off at the bottom. You should |
| recommendations of the research department in | | | | research companies that are in the smaller |
| that firm and, generally, 'sells' those trades to | | | | company market and make enquiries; most do |
| clients. This may seem a cynical description of the | | | | not advertise jobs but are always looking for |
| job role but is not meant as such. Regulations | | | | good candidates. Turnover is high so new recruits |
| within the financial service industry are heavy and | | | | are always required. You will be better received |
| investor protections fierce so each and every | | | | (and will probably get an interview) if you have |
| trade needs to be justified in order to pass | | | | taken the SI exams before you apply, or can |
| regulatory scrutiny. To a certain extent this ties | | | | demonstrate that you are studying for them. |
| the hands of any advisory broker. | | | | In the interview for such a job, you will be asked |
| These days, however, many research | | | | your sales experience, you may even be put on |
| departments are extremely professionally run and | | | | the spot to sell something. (In my first interview I |
| create trading ideas for brokers and their clients | | | | was asked to sell a cup on the desk to the |
| that are well thought out and justifiable. As a start | | | | interviewer!) |
| in the broking world this is a great step. It gives | | | | It is also important to know that the |
| you a grounding in the markets, you begin to | | | | environments in dealing rooms are traditional male, |
| understand why recommendations are being | | | | and harsh. If you are a sensitive soul a trading |
| made and, along with training from the firm you | | | | floor may not be the place for you as you will be |
| work for, can be an excellent introduction to the | | | | expected to give as good as you get. With all the |
| world of broking. | | | | rules these days on how to conduct yourself at |
| Later in your experience of advisory broking you | | | | work it is not as harsh as it used to be, but it is |
| will be able to make recommendations of your | | | | still a pressured environment. |
| own as you become more adept at spotting | | | | Earnings |
| opportunities in the market and, as your success | | | | What can you expect to earn? As a prop trader |
| grows, you will be given more autonomy in your | | | | you will probably be started on a salary of around |
| recommendations. | | | | £30,000 + if you have the right qualifications. It |
| As a 'trader' you are more in the deep end. A | | | | very much depends on who you are working for. |
| typical trader will be focused, initially, on one | | | | A first tier bank or trading firm will pay higher |
| particular marke e.g an equities trader. The firm | | | | than this. |
| you work with will have an extensive trading | | | | You should expect (if the company is making |
| program and you will spend time as a 'trading | | | | profits) to get at least 50% of your salary as a |
| assistant' to an experienced trader. After this | | | | bonus. As you progress and your trading prowess |
| period, and when your employer feels you are | | | | becomes better your salary can increase |
| ready, you will be given limited trading funds of | | | | exponentially, million pound salaries and bonuses |
| the banks own cash. | | | | are common place for the best traders. |
| This is what is known as a 'Proprietary Trader' or | | | | As an advisory broker, without the necessary |
| 'Prop Trader’. Basically you are trading the | | | | qualifications you will probably earn £20,000 per |
| firms own money in order to make profits for | | | | annum plus commissions. Typically someone who |
| your employer. As you become, hopefully, more | | | | approaches the job correctly and works hard |
| successful your trading limits will be increased, you | | | | could expect to be making £50,000 in their first |
| may also be allowed to trade other instruments in | | | | year and £100,000 + thereafter. |
| order to make more sophisticated trades and, if | | | | As a discretionary account trader you will |
| your are profitable, your bonuses will increase. | | | | probably be on £30,000 plus a share of profits |
| The traditional Prop Trader will be working on the | | | | related to how much money the firm is making. |
| floor of a bank or trading house, however, 'prop | | | | Typically a discretionary trader will be managing |
| traders' work in hedge funds and pension funds | | | | 100 - 200 clients after 2 years. With an average |
| trading clients funds that have been deposited | | | | of £50,000 per account that is £5mn - |
| with the employer. | | | | £10mn. Annual management charges to the |
| Another area of trading is 'discretionary trading'. | | | | company will be about 1%, so that is £50,000 - |
| This is typically where an experienced trader is | | | | £100,000 which, essentially, covers your salary. |
| responsible for trading the accounts of individual | | | | A performance fee of 10%-20% is charged on |
| clients rather than a fund or employer’s | | | | the profits of the accounts, making this (at 10% |
| funds. | | | | performance) around £50,000 - £100,000 per |
| This is an extremely interesting area of trading | | | | annum. You would expect to get 25% of this. |
| for those who enjoy the human element as well | | | | Of course if your performance is higher, or your |
| as trading. A discretionary trader will be | | | | average client account size is more, you earnings |
| responsible for a number of accounts which are | | | | will increase on that basis. |
| traded individually. Many traders create | | | | What if you are not so good? |
| relationships with a client base that have the | | | | Unfortunately the broking industry does not really |
| same risk profile which enables them to trade on | | | | care if you are a 'nice person' these businesses |
| an 'omnibus' basis. | | | | are based on performance and you will find that |
| 'Omnibus' accounts are, essentially, a number of | | | | you will be unceremoniously dumped if you do not |
| accounts traded in the same manner across all | | | | perform consistently. |
| accounts. This enables the trader to make trading | | | | The industry is also very cyclical and in times of a |
| decisions that are then executed across the | | | | poor market or low profits, banks and trading |
| accounts in proportion to the size of each | | | | house will cut back staff rapidly and you may find |
| account. For example, let’s say you are a | | | | yourself looking for a job. |
| trader and are looking to trade Google shares. | | | | The good news, however, is that if you are |
| You would make a 100,000 purchase of Google | | | | dedicated and good at your job you will be able to |
| shares and execute these across the accounts | | | | apply for ever increasingly lucrative jobs in trading, |
| allocating 5% of each account to the trade. | | | | management and fund management which can |
| So this is a brief run-down of the types of | | | | produce astronomical levels of pay. |
| broking jobs out there, so how do you get in? | | | | I wish you all the best in your trading endeavors |
| Typically, you get into a prop traders job, these | | | | and would recommend that you download an |
| days, by having the necessary qualifications. A | | | | online trading system in demo format to see if |
| maths, economics and more frequently now, a | | | | you have what it takes, or even to trade your |
| physics degree will get you an interview. | | | | own money and begin learning what is, to me, the |
| However, just smarts will not get you the job. | | | | best job in the world... apart from driving a |
| Most successful traders have the 'X-factor', an | | | | Formula One car for Ferrari... but that is a whole |
| ability to be confident in their own decisions and a | | | | new article... |
| track record of such. Involvement in after hours | | | | |