:max_bytes(150000):strip_icc()/traderatdesk-c0ba0fc2ea244fa699a2a82c06da1cc7.jpg "Choose Your Financial Career Path")
Key Takeaways
- Traders buy and sell securities in capital markets for clients.
- Investment bankers help raise capital and facilitate mergers.
- Both careers require strong analytical skills but different educational preferences.
- Trading and investment banking environments are high-pressure.
- Traders often need FINRA Series 7 and 63 licenses.
The financial services industry includes a variety of professionals, including traders and investment bankers. A trader is a person or entity that buys and sells securities and other financial instruments in capital markets on behalf of clients (or themself).
An investment banker helps clients access capital through investments and assists with mergers and acquisitions. There are no legal standards of education required to practice as an investment banker or trader, although some employers establish some minimum.
Exploring the Role of a Trader in Finance
A trader is a financial services intermediary who buys and sells securities and other financial instruments in the capital markets (e.g., stock markets, commodity markets, and derivatives markets) on behalf of clients.
There are many types of traders, but some of the most common are:
- Flow traders: who use client funds to trade
- Agency traders: who act as intermediaries and place trades on behalf of clients
Other traders act as proprietary traders, engaging in trades on behalf of their firms, or take the other side of a trade when no buyer or seller is available. The duties of a trader are not limited to buying and selling. They also include researching economic trends and developments, reviewing reports, and analyzing market data.
Traders can have varying academic backgrounds. Many firms require their day traders to have undergraduate degrees in finance, mathematics, and accounting. However, there are no legal academic requirements to qualify as a trader. Requirements for getting hired will depend on the firm.
Investment Bankers: Key Roles and Responsibilities
Investment banking is the financial services sector in which professionals help clients raise money/capital through investments. Similar to traders, investment bankers connect buyers with sellers. Like traders, investment bankers are involved in the bond and stock markets.
However, investment bankers often have more duties. They bring together buyers and sellers via mergers and acquisitions (M&A), or they might raise money in the capital—debt (bond) or equity (stock)—markets when they sell a company to the public in an initial public offering (IPO) or when restructuring existing companies.
The background of investment bankers may vary significantly, but most have a mathematics foundation. Also, many hold advanced degrees, such as an MBA, with concentrations in finance, math, or accounting.
Important
To work as an investment banker, many professionals and employers of these professionals require formal training and the completion of continuing education requirements.
Careers Compared: Traders and Investment Bankers
Traders and investment bankers have similar jobs in that they are both involved with finance and securities. However, these two professions do have some significant differences. Let’s review how they compare.
| Traders | Investment Bankers |
| Develop relationships with clients cultivated over a short time span, after which trades are usually quick to develop and execute | Work on deals that may take months or years to develop a relationship and get the deal done |
| Typically are at their trading desks early in the morning prior to the market open and don’t leave their desks until the markets close. (They may not work after the markets close or on weekends and holidays.) | Work extremely long hours, including weekends and holidays |
| Need to have a keen understanding and reading of markets and patterns. Described as bold and decisive, with natural instinct about how the markets work. | Play a dual role of relationship builder with good interpersonal skills and a financial expert who constructs a plan that is tailored to the client’s needs |
| Usually specialize in one asset class (typically stocks and bonds). They may also work with derivatives in the commodities markets (such as wheat or oil) and in currency markets. | Tend to specialize in one area and operate within their expertise |
What Education Is Required to Become an Investment Banker?
Generally, you should have a bachelor’s degree in business or a math-related field like accounting to become an investment banker. Having an MBA, or Master of Business Administration, can also help you advance in this career.
What Is the Series 7 Exam?
The Series 7 exam is a test you must take to get your Series 7 license, which allows you to sell securities products. However, it does not license you to sell bonds or commodities. The Series 7 exam, also called the General Securities Representative Qualification Examination, assesses your basic knowledge of securities.
The Bottom Line
Both investment bankers and traders work in stressful environments in which an enormous amount of capital is at risk and a firm counts on fees to grow overall revenue. Traders buy and sell securities in capital markets on behalf of clients. Investment bankers help clients raise capital through investments and facilitate mergers and acquisitions.
Although they operate within the same financial services industry, each has a distinct role and requires different skills and personality characteristics.
