A very bright, energetic, and disciplined young friend, who recently graduated from a top college, is considering applying for a job in proprietary trading with First New York Securities in New York. She has been successful in trading stocks for a stock market club. If hired, she understands that she would earn an annual salary of $45,000 during the required fifteen month training program. Upon satisfactory completion of the training program, she would then be allowed to start trading. During the first year of trading, she would continue to receive $3750 per month as a draw against her share of her trading profits. She understands that within a couple of years of starting to trade, if she performs up to their average, she will be generating at least $500,000 annually in trading profits. She would be allowed to keep half of these profits as her compensation for her trading success, so she would be expecting to have personal income of at least $250,000 annually at that time. She would be trading the firm's capital only, so she would be risking none of her own capital. Is it realistic that she could earn this much money for herself this soon? Should I encourage her or discourage her from pursuing this? If hired, how likely is it that she would succeed and enjoy this? Is there some hidden flaw in this arrangement?
Many new traders would be wiped out in less than a half year. The problem is whether she can find a method that keep her making profits. Even you do well in the training, it doesn't mean you will do well in the market. Training and trading is very different. I had such experience. But if she doesn't need to risk a penny then it is worth trying.
Some prop firms sure sell a smooth line... I doubt those numbers are a realistic average for a kid 2 years out of college (unless that spiel is copy back from the go-go years of 1999-2000)... remember, most traders blow their accounts!
Here are a question and answer from www.thevault.com: How much money does the average trader make for himself during his second year of trading at FNY? Answer posted by someone who seems to be a fny employee: $300K Maybe this person doesn't know or is deliberately misrepresenting, but I don't know of any reason why he or she would choose to do so. It seems that fny hires very bright, energetic, high aptitude people and does a great job of training them both in classrooms and on the job as assistants to very successful traders. This seems to be a good deal for both fny and the new employee. If there is a hidden flaw from the new employee's perspective, what would it be?
Alot of my friends took 'graduate trainee program' positions at investment banks after graduating. They all hoped to be 'trading' but from what I've seen they are all stuck in analyst or market making positions which is not what they hoped. Apparently only the cream of the crop actually get to take speculative positions with the companies capital after many years of Market Making and analyst. Trading and Sales is the slowest for career progression my opinion, although any part of Investment Banking seems to be suffering at the moment. One sneaky option for future careers in IB is management. You'll never get to work the markets but you'll find your alot safer, another of my friends whilst not being the brightest ended up in the management and operations department and had a say in the recent redundancies!! As to your friend, its quite a decision. If she goes to FNYS and makes it then she will be made. If she doesn't make the grade then at least she'll never say what if when she's slogging away analyzing dog shit stocks 12hours a day!!
The numbers seem awfuly high and averages can be deceiving. Ask for a median number as well as a distribution of earnings by the traders. Also see if you can get your hands on the firms audited financials. More important to your friend should be how good the training program is. If they have an excellent program, the skills learned could be used anywhere. I'd urge your friend to contact a few people who currently work there outside of management. That's where they'd get the best info to learn the pros and cons of the firm.
half a million within two years? pretty high expectations if you ask me. not saying it can't be done, but highly doubtful. no matter how good the training is, a trader will not be able to trade like his/her mentor. the individual must find their own method/strategies and this takes a long time. i must say getting into this profession thinking you will be making mucho $$ in a short period of time will lead to tough times ahead. best of luck to your friend.
Pre-2002, I'd say those numbers would be somewhat believable, much less so this year. And with the way the markets are headed, those average incomes are probably going to come down a lot as volatility and volume dries up. But getting paid a guaranteed salary while learning the markets is a pretty good deal. If she's not taking home what she expected, she could always go out on her own and keep 100% of her profits.