Analyst Programs Going the Way of the Dodo?

It doesn’t make sense to expand it or maintain it at current levels. There is such an abundance of talent available right now. Why spend the money on some kid who’s gonna leave in 2 years when you can hire someone with years of experience and can hit the ground running?

Wow, this is potentially big news! Normally, when a top institution does something like this, other firms will follow. If you ask me, it’s about time. The 2-year IB analyst program never made a lot of sense to me. You get a bunch of smart kids, and then torture them for two years and ruin banking for them. And then, you kick most of them out after 2-years and lose whatever training those kids have received. Other than psychopaths, who doesn’t burn out after working 80-hour weeks for two years anyway? In the long term, it would be better to give people a healthier and more balanced working environment with some hope of a prolonged career. They will stick around longer and might even become more productive.

No. $70k or more is pretty standard for all kinds of competitive jobs - consulting, engineering, or even finance jobs that do not follow the 2-year program. Plus, $70k is the base. With bonus, analysts in a 2-year program make more than $100k in the first year. 

Banks don’t need to pay more than $100k to new college graduates. They can just reduce work time from 80 hours to 50 hours, and reduce compensation commesurately. They will get happier, healthier, and less psychotic analysts. Banks also don’t need to kick people out after 2 years. The super star analysts can still be paid a lot. It’s just that the 80 hour requirement is sort of ridiculous and unproductive. 

This announcement isn’t about hiring fewer people - it’s just about changing the structure of the program so analysts get comped on the same timing as everyone else. Basically a big part is because analysts these days often get approached by PE/HF’s within six months of hiring – at least the best analysts do – and many of them leave after their first year (and sometimes even earlier!). This is a real risk to the bank of course, because after a few months you really don’t know that much as an analyst and your contribution to the company is far less than what you’re getting paid.

This seems to be Goldman’s response to that, and as well, it saves the company money. It used to be that analysts would get another bonus after working for two years even if they were going to leave; now GS just won’t pay people their stub that stick around just to finish the program, but rather only comp people who stick around. I’m pretty sure most of the other banks will follow suit soon.