Just as recruitment for lucrative junior analyst positions at investment banks heats up across college campuses, Goldman Sachs (GS) dropped a bomb.
The Wall Street firm announced earlier this month that it will change its much sought after two-year analyst training program in its investment banking and investment management divisions, a tradition it started a quarter of a century ago. Instead, Goldman will offer full-time positions, said spokesman David Wells.
Now, some worry that other investment banks on Wall Street will cut training programs coveted by undergraduate students.
"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 at a time when 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 profits. Wall Street firms cut more than 75,000 people in 2011 and analysts estimate that the industry will have up to 15% fewer employees in 2013 than at the start of 2012.
Goldman alone has cut staff by 10% since 2010, a period when its revenue has shrunk by a quarter. Wells said that the change to its training program was not made as a way to cut costs.
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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 are attracted to 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.
"As long as undergraduate debt levels continue to rise ... students will always be attracted to a 'quick fix' -- jobs that offer high salaries," said Laura Newland, a 2010 Duke University graduate and management consultant who is writing a book on the influence of Wall Street on college campuses.
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.
"Because of the tutoring that people receive from one of the best banks out there, there's going to be a little less knowledge of how to do it well, Goldman-style," said Useem.
Goldman's Wells said that analysts will still receive training. The difference is that they will start as full-time employees.
"That's the only change," he said. "It takes away the anxiety of wondering if you have a full-time job after two years."
The impact of Goldman's decision on the number of students with Wall Street jobs 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.
