A whole bunch of current college students and new graduates have just had their Wall Street dream shattered.
Goldman Sachs announced it is getting rid of its storied two-year contracts for analysts hired out of college, according to communications reviewed by The Wall Street Journal and confirmed by a Goldman spokesman.
Adding insult to injury, analysts also won't get bonuses for completing the program, which has been around for 25 years. [Read: Details Emerge About Greg Smith's Tell-All Book, "Why I Left Goldman Sachs"]
The WSJ's Deborah Kan spoke to headhunter Ranjan Marwah about Goldman’s new policy:
From the WSJ:
Goldman's move is a blow to junior analysts who put in legendarily long hours for a shot at moving up the ladder. It is the latest sign that the financial industry is grappling with issues such as pay and perks amid an uneven economy and tight new rules limiting profits. A typical investment-banking analyst class at a Wall Street firm numbers about 100 people.
Analyst programs are "being looked into across the Street," Richard Stein, a New York-based partner at Caldwell Partners, an executive-search firm, said in an email. "Banks are now seriously questioning the payback" of the programs, which have been narrowed down to an "even smaller group of elite graduates."
Goldman has long been viewed by would-be bankers as the fast track to Wall Street wealth and by rivals as a wellspring of talent. Alumni from the much-copied analyst program, which started when Goldman was a private partnership, include top Goldman executive John S. Weinberg and technology-stock analyst Rick Sherlund.
The New York company's decision came after executives grew frustrated that many graduates weren't staying with the firm after completing the two years, and after Goldman fired a handful of analysts over the past year for signing on to work at other financial companies in violation of their contracts.
Goldman has been reaching out to employees over the past two days to inform them of the changes, which will take effect for analysts who will start in 2013.
"We think the historic two-year program is no longer the best approach for hiring and developing the careers of analysts in our banking and investment-management divisions," said the Goldman spokesman. "Making this change allows us to emphasize the longer-term career opportunities available at the firm."
The WSJ notes that analysts are the bottom rung on a ladder that can lead to the top hallways of power of Goldman, where partners make millions of dollars in annual compensation.
According to the WSJ, Goldman analysts were paid around $70,000 in their first year and $80,000 in the second.
Their bonus was reportedly often the size of their full salary before the financial crisis, though it has shrunk since then. When analysts completed the program they received another final bonus.