Just as recruitment for lucrative junior analyst positions at investment banks heats up across college campuses, Goldman Sachs dropped a bomb.
The investment bank announced in September that it will end its much sought after two-year analyst training program, abandoning a tradition it started a quarter of a century ago.
Now, some worry that other investment banks on Wall Street will follow suit.
“This may be a forecast of a broader trend on the Street,” said Michael Useem, director of the Wharton School of Business’ Center for Leadership and Change Management.
The decision comes as investment banks are under pressure to get lean. New laws passed after the financial crisis, a slowdown in the global economy and record low interest rates have eaten away at their business.
Banks have been slashing jobs as a way to preserve their profits. Wall Street firms cut more than 75,000 people in 2011 and analysts estimate that the industry will have up to 15 percent fewer employees in 2013 than at the start of 2012.
Goldman alone has cut staff by 10 percent since 2010, a period when its revenue has shrunk by a quarter.
Investment banks have suffered a reputation setback after the financial crisis and the Occupy Wall Street protests have dimmed the luster of the industry. But students covet Wall Street jobs because of the promise of a fat paycheck, especially at a time when they are graduating with bigger loans than ever.
Goldman’s and other investment banks’ training programs have provided young graduates not only with a high-paying career for at least two years but also an established path to a career in finance. People familiar with the programs said that junior analysts are usually paid $70,000, with the potential to rake in the same amount in annual bonuses.
Wharton’s Useem fears that getting rid of these training jobs could mean that young analysts would miss out on a “Master’s degree in financial services.” He worries that if banks cut these programs, it will deprive young people of being better prepared for Wall Street careers.
The full impact of Goldman’s decision won’t be seen until the spring.
e less knowledge of how to do it well, Goldman-style,” said Useem.
The impact of Goldman’s decision won’t be seen until the spring, according to University of Pennsylvania’s director of career services Patricia Rose, when universities collect information about post-graduation plans. But Rose is hopeful that the decision won’t change hiring.
Princeton University has already seen a shift in recruiting on its campus, according to its career services spokesman Martin Mbugua. He’s noticed that banks are more focused on recruiting for summer interns rather than full-time hires.
