INTERVIEW

Chris Soprano, Advisor, Bondchain

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I was very keen to interview a broker for this project – aside from being a lucrative profession, it’s also one shrouded in mystery and with high barriers to entry. Luckily, Chris happened to join our Toastmasters club (of which he is now the President) at around the same time I did, and was willing to talk openly about the world of financial sales and broking.

Chris lifts the kimono on what it takes to be a broker, how much you can earn in the financial world, and the changes he’s seeing in the market currently. It’s hard-hitting stuff from a finance and technology lifer.

You can read Chris’ full biography here, and another anonymous interview on financial sales here

 

 

Jamie: Chris, let’s talk about your career in sales and broking. What have you found most fulfilling about your career so far?

Chris:

The fulfilling part of the job for me, particularly broking, is the notion of creating something from nothing. You can make a single cold call and off the back of that create business. Also, building a relationship that provides remuneration in exchange for your time. In some cases, these connections may even add to your personal life, and that cold call over time can become a friendship.

 

In the broking world, creating something from nothing is the major nuance that differentiates it from sales. It’s this nuance that I became infatuated with.

 

Jamie: Could you talk to me about that distinction between sales and broking. Would you consider broking to be a sales role?

Chris: Broking and sales, to draw broad strokes, are made up of similar skill sets. There is a certain percentage of salespeople who could not be brokers and vice versa.

The main nuance is to separate the two, based on inventory, or risk, in the financial world. Most salespeople can offer inventory to their client. This intertwines with brokers creating something from nothing, whereas salespeople have something to sell. Therefore, with brokers, you have to create your inventory by finding a seller for your buyer and vice versa.

Brokers don’t have an inventory or anything tangible. They have to create something from nothing. In my particular world, in the finance world, salespeople work at banks. The salesperson deals with the trader, whether it is equities, bonds, foreign exchange etc. A salesperson will call into their trader saying, “My client wants to buy or sell this particular stock, or bond, or FX option.” The trader will communicate a price, then the salesperson will then go and sell a particular financial instrument.

It’s all about supply and demand. One of your clients has some demand, and you have to go find the other side, which is the supply side and vice versa. When he gets asked about supply and demand, he goes to somebody else with a salesperson, and they provide it.

So, the nuance is either having access immediately to the inventory, or risk, versus a broker who has to go and then find the supply and fulfil demand himself

 

Jamie: So, broking requires twice as much selling?

Chris: Yes. I think that is a good summation.

 

Jamie: What additional skills do you think brokers need, that salespeople might not? 

Chris: In my experience, especially in the financial world, there is aggressiveness in brokers and additional creativity to find their needs. A broker realises that a deeper relationship is needed with your client; more so than that of the salesperson.

Clients often do business with a salesperson because of the inventory they can access but are willing to business with a broker because of their relationship. Brokers realise this and work harder at the relationship than do salespeople.

Here’s a story. A friend of mine left a large bank with a lot of inventory for a smaller bank. He swiftly discovered he was doing less business with his same clients. He soon realised that his clients really didn’t love him, they loved his former bank because of the service it could provide. That goes for most salespeople, it’s that they use the crutch of the inventory that their clients have to build relationships with people. The salesperson simply becomes a conduit. A client “uses” the salesperson to access an inventory or risk. 

Brokers don’t have inventory, so you’re only as good as your relationships. Brokers need to build a relationship to get supply and demand.

 

Jamie: What additional skills are needed form that depth of a relationship? 

Chris:

The broking world is not a job, it’s a lifestyle, and that is a key difference. 

As a salesperson, you can start at 8am and go home at 5pm if you want to because you know the clients will do business with you anyway, because of their relationship with the bank. In the financial world, you have the inventory, or perhaps your firm provides research that the client needs. The salesperson can be a commodity; in many cases, it doesn’t matter who you put in that “seat”, one will achieve more or less the same amount of revenue. Whereas a broker needs to dedicate their lives to the job. Sometimes, your job starts at 5pm, and you have to be out for five nights a week. So, in some sense, you need to be more social. You need to have more relationship-building skills, which is very important, and you have to build a relationship built on trust.

Back in my day, I had sales training, and the guy I learned from was Zig Ziglar. The first thing I learned was, “People buy from people they like”.  You have to get people to like you; even more so in the broking world than in sales. You have to sell yourself more.

 

Jamie: In terms of the relative compensation between sales and broking; who’s better compensated?

Chris:

It all depends on the stage of the economic cycle, but the difference between the two is that in sales, everybody gets a decent salary. In some cases, brokers can have a zero salary and an 80 percent pay-out as far as a bonus is concerned. This makes the broker “hungrier,” or makes them work harder, as it’s “you eat what you kill.”

Let’s consider my world, the bond world. Let’s say there are 3 people with different types of jobs in the City of London. Salespeople at the banks, inter-dealer brokers whose customers are the banks, and then the agency brokers. Agency broker’s clients are the traders in the hedge funds, the “buy-side.”

Salespeople generally get a higher salary because sales can be more of a technical pitch and thus require a certain education and background.  They take the best students in finance at the best schools to attract them. Let’s throw out numbers here – it’s about £200,000 to get somebody into that seat.

When they sell bonds, they get sales credits which are accumulated over the year. At the end of the year, the banks give them about 8% of the sales credit as a bonus.  Inter-dealer brokers generally get lesser salaries obviously depending on your age or experience. This would maybe hover around a £100,000 a year as an average. On top of their salaries, a broker’s bonus compensation can vary between about 30% and 50% commission on the trades that you do.

And then there are the agency brokers which again speak to the Buyside. They’ll have a much smaller salary, but their pay-outs can be anywhere from 50% to 80% commission on their deals.

 

Jamie: What skills have you seen be a requirement in salespeople or brokers in finance?

Chris: Wall Street sales, as opposed to Main Street sales, is different; no disrespect meant. Somebody selling salt shakers versus selling complex structured products requires a particular education with the latter, you need a particular intelligence to sell these complex financial products.

The reason these guys get compensated so well is that they have the intellectual capabilities to understand these instruments; to digest information and be able to sell it and adapt quickly, but also have social skills alongside this – to be able to talk to people, to take them to dinner, to drinks, and build relationships. So that is basically a unicorn, in that they have intellectual capability and social skill.

 

Jamie: Does everyone in this industry have a college education?

Chris: In banking, yes. In broking, no.

Broking is starting to change a little bit. It used to be the old boys’ network. Today, the broking companies are actually putting together graduate trainee programs. They go recruit at universities. They advertise it. They get 20 people out of University and do rotations with different financial teams.  They sit on the gold desk, bond desk, FX desk etc. At the end of the rotation, say six weeks, they get placed in certain areas.

For commoditised products, like foreign exchange, you really don’t need to know a lot technically. The broking cycle, or time it takes to do a transaction, could be second or minutes for these liquid instruments.  Conversely, a structured product is far more complex and could take days, weeks, and months to trade.

To me, there is vertical intelligence versus horizontal intelligence. Vertical intelligence is understanding a complex product, interpreting it and then communicating to a client. Whereas, horizontal intelligence happens in commoditised products and has more to do with communicating supply and demand instead of having to communicate the intricacies of the product 

 

Jamie: So, those with different sales skill sets will be differently valuable to different organisations based on their complexity and the complexity of what they’re selling? 

Chris: Again, it all depends, take the two sides of a salesman as a generalisation. There are technical salespeople, and then there are social salespeople.

I mean sales is very simple. Well, I should say, for me it was. It’s just a transfer of belief, I had to believe in what I was selling; otherwise, I couldn’t sell it. The technical salespeople that have a lot of interpersonal skills do very well. 

The organisation should match this to align the salesperson with the right client.If there is a very technical client, then match the technical salesperson with them. The other side of the scale is the social salesman. The relationship salesperson could be at the same bank, selling the same thing. The organisation has to match that person with clients who don’t require as much technical information.

There is an equilibrium which usually means that the most successful salespeople have an equal amount of skill in relationships and selling as they do in technical areas.  I think salespeople must do a self-analysis of where you are on that curve.

It’s a lot easier for a salesperson to learn more about the technical side of things, as it is acquired knowledge. Whereas for a technical person to develop a personality is not so easily facilitated.

 

Jamie: How would you recommend that salespeople benchmark where they are, on a social versus technical scale?

Chris: It depends on how your organisation is set up. However, naturally, technical salespeople tend to gravitate towards the technical clients and the social clients who just want to be taken out until one o’clock in the morning, will gravitate towards the social salespeople.

If it is a more structured organisation, the onus is on the management to put the round peg in the round hole. This lack of execution is probably one of the biggest failings of organisations, spending too much time putting the round salesperson with the square client.

 

Jamie: Do you still feel that the “1am culture” is as strong as ever?

Chris:

In my industry less so, because of the anti-bribery laws introduced in the last decade or so. You can spend money on clients, but you have to be prudent about it. I have seen businesses built due to technology that trade commoditised products. I’ve also seen businesses built on late nights out. 

When you think that back in the ’60s or ’70s, especially in the old-school City of London, when trading commoditised products, traders didn’t trade on price per se, because different brokers had the same price, but they traded with a particular broker because of the relationship.

Guys would go down the pub from 12 to 2 with their client and then come back from the pub and make the trade with that client. It has always existed in a sense, and that is why they brought in anti-bribery laws.

When dealing with a new client in the market, there is a competition for their business. You have competitors vying for their business. You’re trying to court them, to build a relationship. To get more business out of them. In a sense, they want to be courted. They have to do business with somebody, and they want to do business with somebody they trust. If you can build that relationship, it is the trust that is the key. Whether it be sales or broking, we are in a trust-based business, where building trust with somebody is a key skillset.

 

Jamie: What core skills are integral to that building of trust?

Chris: It’s just a subset of the real world: if you are an honest person in your personal life, then that will come through to your business relationships; generally, it’s your personality that comes across. Clients will sense honesty, and they know a snake-oil salesman when they see one.

 

Jamie: Would you recommend financial services to any salesperson?

Chris:

What I always tell people, especially younger ones, if you have a passion in your life, then pursue it. If you don’t have a passion, then put yourself in a position and industry where you can make the most money possible and pursue your passion as a hobby. The financial world is such an industry where you can get high remuneration compared to others. 

 

Jamie: Do broking and sales pay approximately the same most levels? 

Chris: I would say the mean or the median, probably.

The salespeople generally have higher salaries. So, therefore, a very lean year means the brokers really aren’t getting bonuses. The salesperson is going to be making more in these years.

However, bonus structures are roughly 8% for the salesperson versus 35% for the broker, therefore, in high-volume years, brokers will make more.

 

Jamie: How do you find the sales training in your industry?

Chris: There is none. It’s basically sitting next to the guy next to you and try to pick it up. There are some graduate trainee programs that some organisations have, which offer some product training.

 

Jamie: Is that true in a bank as much as it is true in a brokerage? 

Chris: Yes. I can’t speak for the banks. I mean they have training programs, but I don’t know how much sales training they have, a lot of it is basically baptism by fire. You sit on the desk, and you learn as much as you can.

 

Jamie: How did you get into the finance industry?

Chris: Much like 80% of the broking industry people, it was the old boys’ network. I had a friend from University that was doing broking over here, and he hired me.

 

Jamie: Why did he trust you enough to bring you in?

Chris: It was the relationship that we had, and I was doing something similar, so I had a lot of knowledge going straight in.

On a broking team, you cover institutional clients, Goldman Sachs, Citibank, HSBC etc. Let’s say there are five brokers on a broking team. Each broker covers five clients. So, you have 25 clients in total. You are all interrelated to each other, and you’re transacting with each other. You are part of a team, and it’s all about camaraderie, and it’s all about trust. Therefore, you don’t want to leave a hiring decision out to an HR team, to hire somebody you don’t know.  It is such a close-knit team that you want to work with somebody you know, somebody you like, and somebody you trust. So, the hiring practices in the broking world are a little bit different than the real world.

Broking is a lifestyle, and sometimes the job doesn’t start until after you leave work; when you are going out with clients and your team. You want to go out and socialise with people that you like. It is very insular; that’s why there is a negative connotation of the old boys’ network, but it works for the people on a broking desk in the city.

 

Jamie: So, what advice would you give to people who aspire to be in this world but maybe didn’t have that old boys’ option?

Chris: A friend of mine wanted to work in the city. He used to cold call all the broking desks daily, and everybody hung up on him.

He used to call this particular broking company every single day. One day, they didn’t hang up, but instead, the desk head said “Listen to me. I’m going to be in this bar in a half-hour If you can get there and If you’re there in a full suit, I’ll give you an interview,” And he hangs up the phone. 

Long story short, he got there in time, in a suit, and he got hired. He had an incredibly successful career as a broker. 

So anyway, the reason I bring that up is that you don’t need to know anybody. You can persevere. You can call people. You can get involved in the desk. We once hired a guy that wanted to work in the city. So, he used to go to bars by himself. He met my boss at a bar and said he was there to meet City guys to get a job. So that does exist, and that can be done. 

 

Jamie: If you were starting your career in finance again, what would you do differently?

Chris: Nothing. I would have started earlier. I didn’t know what I wanted to do until I was 28. The reality of it is, I didn’t know what Wall Street was. My father was an accountant, and we had a nice life. I never questioned what accounting was, I just majored in it at University.

Then I found out about the bonuses that my friends were making on Wall Street. I started inquiring about Wall Street, and then I realised that part of my accounting degree dovetails into the finance world, and I could do it. I didn’t have a vocation, so I eventually found an industry that remunerated me the way I wanted to be remunerated.

 

Jamie: Can you tell me about a time when you failed, in brokering or as a salesperson and it really taught you something about what you needed to do to succeed?

Chris: Being a salesperson is whether you succeed or fail on every phone call you make. You have micro-failures that make you succeed because you have to and can adapt. The successful guys are the guys who adapt. If you start going on a certain course with your sales pitch and you keep on failing, and you stay on that tack, you will continue to fail.

If you have enough honesty with yourself; enough self-awareness to realise where you’re failing in the micro, then you can adjust. If you succeed in changing your micro successes, then you will have macros successes. I have had cold calling experience, which is some of the best sales training that you can have. Every phone call could represent being remunerated.

 

Jamie: Can you tell me about a time when you succeeded in a sales or broking pitch, and it really showed off the skills you have developed in your career?

Chris:

Creating something from nothing. In the broking world, before the trading screens came in, we had a notepad and blotter. In the morning, the notepad was empty; no prices, nothing. I would sit there and say, “how the hell are we going to make money today?”  Then, you get on the phones, and we start shouting down to your customers “Hey, what can we do today?” You get a price where you want to buy or sell a bond, and at the end of the day, your blotter is completely full. A full blotter means you made money.

During the height of the business, we had very lucrative days. So, to come in from nothing and create something, that was the gratification.

To create something from nothing in my business, could be simply looking at the news. For example, “Hey, did you see that headline where Daimler’s lost a million Euros?”  You start asking your clients questions like… “What do you think that’s going to do to the stock?”  “What do you think that’s going to do to the price of the bond?” “Do you think you’d be a buyer on the back of that news?” “Do you think you’ll be a seller?”

If you’re a broker, it all comes down to probing clients and have the confidence to get on the phone and keep on asking those questions and again. Creating something from nothing – taking that blank sheet of paper that you see in the morning at 6:45am and then at the end of the day, when you see that full pad of prices and trades, realising what you made happen.

 

[END]

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