Post Trade-Ops Not Just for Traders Anymore

Post-trade operations is evolving beyond its status as a stepping-stone to the front-lines of trading. As the front office slashes staff, the back office is quickly becoming an attractive career path for new entrants into the financial services sector. But to succeed takes a unique mindset and skills beyond just pulling the trigger on a trade.

Post-trade operations is evolving beyond its status as a stepping-stone to the front-lines of trading. As the front office slashes staff, the back office is quickly becoming an attractive career path for new entrants into the financial services sector. But to succeed takes a unique mindset and skills beyond just pulling the trigger on a trade.

When Josh Brodman first dipped his toe into post-trade operations, he wasn’t quite sure what to expect. It was 2005 and Brodman, then a junior majoring in finance at Binghamton University, had just secured an Ops internship at a hedge fund with roughly $6 billion in assets under management (AUM).

“I was looking across the whole spectrum at a lot of different areas within finance,” Brodman says. “This seemed like a good way to kind of step into the industry.”

Brodman spent seven months working under the fund’s chief operating officer (COO), getting exposed to various back-office functions and also spending face time with traders and the marketing department. He found he enjoyed being in the middle of things.

After graduation, Brodman took an entry-level Ops position at a large asset manager, and stuck with this discipline even as he bounced around at a few different firms. Now, he’s head of operations at Venor Capital Management, a small- to mid-size hedge fund, and says he couldn’t be happier.

“I love my job because I get to be integrated into so many aspects of the whole process,” Brodman says. “I get quotes on bilateral derivatives, aggregate quotes, make sure trades settle properly, things like that, but then I’ll also meet with investors and work directly with the traders.”

Brodman had the opportunity awhile back to move into front-line trading. “But I’m just not as interested in running a book as I am in working with the bigger picture,” he adds.

In some ways, Brodman’s story is typical of many of those employed in Ops across the financial sector. A good eye for detail and a willingness to master several Ops silos, sources say, is essential for success in today’s post-trade world.

But unlike Brodman, many in Ops won’t be there for long, at least if they can help it. For some, Ops is viewed as just a pit stop on the road to the trading floor, for better or for worse.

A New Narrative for Ops Staffs

“For a lot of people, Ops usually serves as an entry point to the industry as a whole, and once they get into that role they’ll start to look around,” says Phil Sindel, president of consulting firm Olmstead Associates. “From there, some people will try to get their CFA [certified financial analyst] credential and move into trading, or go on to climb the management ladder in Ops itself.”

Sindel says that, like Brodman, many of those who choose to make a career out of Ops genuinely enjoy climbing down into the trenches and mastering highly technical areas like reconciliations or corporate actions.

“People who stick with Ops tend to be very process-oriented, detail-oriented, procedural folks who’re good with numbers,” Sindel says.

That certainly describes Linda Singer, managing director of operations at Angel Oak Capital Advisors, a mutual fund firm.

“I love the process of it, I love the challenge of it,” Singer says. “Whatever your specialty is, to be good at Ops you have to be flexible and never say ‘no.’ No one ever wants to hear that you can’t make it happen, and that keeps you on your toes. I enjoy that.”

Singer got her start as an internal auditor at Salomon Brothers in the early 90’s, before moving onto the trading floor and working closely with traders handling Ops for the emerging markets debt desk, she says.

But despite working closely with them for roughly four years, Singer says she never felt the urge to jump ship from Ops and join the traders. That’s one trait that unites her and Brodman, but separates them from many in the Ops profession, who view back-office roles as merely a stepping stone to the front.

“There’s certainly some truth to that narrative,” says Spencer Knibbe, head of the governance risk and compliance (GRC) practice at Full Moon Talent, a recruiting agency. “But now, in 2014, I don’t think you see people trying to take that route as much as you once did. I think it was much more common several years back.”

A cursory Google search of “back-office” – a term often used more or less interchangeably with Ops – reveals that the narrative of treating an Ops position as the first step on the path to the trading floor is still prevalent, however.

Many of the top results are links to forum and blog posts that either provide a how-to manual for that plan or lament a blog-poster’s inability to carry it out. Titles like “Trapped in the Back-Office,” “Stuck in Operations: Advice from a Former Victim,” or “Career Advice: Moving from Back- to Front-Office,” are common.

But people like Singer, who like Ops for Ops sake, have little time for people that can’t appreciate the unique satisfaction of an Ops job well done.

“My personal pet peeve is people who work in Ops and view it as a rote job,” Singer says. “You have to be willing to learn a lot about a lot of different areas to be good – you can’t just know what you’re doing but not understand why you’re doing it. I don’t think you can do well at this job if you’re a frustrated, wannabe trader.”

A Growing Appreciation for Ops

That doesn’t mean, however, that there’s anything wrong with a prospective trader spending a bit of time in Ops. They just need to be upfront about it, and make good use of the learning opportunity represented by a stint in Ops.

“Some of the best traders I’ve worked with are the ones who’ve come from the back-office, because they understand the whole business” Singer says. “But that’s also highly dependent on the firm. A lot of firms don’t hire from the back-office.”

There is evidence that the traditional, stark black and white division between the front- and back-office might be beginning to break down however. As technology plays an increasingly integral role and post-crisis reforms saddle firms with more and more operational challenges, Ops has seen its stature in the hierarchy of financial services positions rise, along with other back-office roles like compliance and risk management.

“As financial markets become more electronic, operations becomes more important,” Knibbe says. “At the same time, trading jobs are being cut left and right. So I think there’s definitely an increased appreciation for those roles.”

Knibbe adds that he’s seen salaries for back-office positions rising steadily for years, and predicts that this trend will only continue for the near future.

Sindel, the consultant, says that Ops, just like the financial industry as a whole, is in a transition period right now.

“You’re seeing more and more firms look to outsourcing firms to handle back-office functions, and some of those positions are being lost due to increased automation as well,” Sindel says. “It’s hard to say what all this will look like when the dust settles.”

Nonetheless, it looks as though Ops is becoming increasingly interesting in the eyes of those just preparing to enter the financial industry.

“Back in the day, banks would often just hire relatives into the back-office, as a favor,” Knibbe says. “Their qualifications didn’t really matter. Now a lot of young people are making conscious decisions straight out of school to go into these types of positions, and banks are really making the effort to recruit people with the knowledge base to succeed, because now they realize how important the role is.”