How to make more than $250k as a strat in financial services
If you're working as a strat in an investment bank, Alexander McFarlane has some advice for you. McFarlane, who was himself a former strat/quant researcher, says banking strats jobs are not where the money is. In banks, strats are becoming devalued, says MacFarlane: there are far, far more lucrative roles on offer elsewhere.
For those not familiar with the term, "strats" in banks are kind of glorified quant developers. They often work with datasets and model business requirements, typically using languages like Python or C++. "To some degree, strats are just very skilled devs," McFarlane says.
McFarlane truly loved working as a strat for Nomura, but he says that even in a front office strats job in a bank today, your pay will typically hit a ceiling. "You're looking at a base of around $150k, and maybe total compensation of $250k tops. But that doesn't go far once you factor in childcare and buying a house. You are never going to get rich working in an investment bank today."
The heyday for strats jobs in banks was 2005, says McFarlane. That was when banks were building the libraries of models that today's strats preside over, and when the job was both interesting and well paid. Today, strats are mostly likely to be found "swearing at" those precise legacy systems. Matters are being made worse by a clampdown on strats running their own money-making investment strategies on the side. Nor are things likely to get any better: strats roles in banks are increasingly becoming about "regulatory migration or maintenance."
What is a strat on $250k to do? McFarlane says the new best place for his counterparts is not banks, but DeFi. It's not just because he himself has made the move and founded Keyring Network, a privacy-preserving compliance tool, but because the DeFi sector has a huge need for strats to do the sorts of jobs banks were hiring them for 17 years ago. And it can pay.
Because DeFi is new, core libraries are still being built, says McFarlane. Developers who understand finance and who can code in Solidity or Rust are needed to build the backbone of the new system. In the process, they can become very rich indeed. "The base pay is generally about 50-75% of pay in an investment bank, but the difference is that successful start-up equity can exceed lifetime earnings of any trader." Some strats in the DeFi sector have millions in equity, he adds.
Given the well-documented travails of the crypto sector and the collapse in demand for NFTs, banking strats who are discontented with their lots might be hesitant before taking their skills to the blockchain. However, McFarlane says they have little to lose and that the strats goldrush in DeFi won't last forever: the libraries of the future are being written now; it's like 2005 all over again, but in Solidity and Rust instead of Python and C++.
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