September 16, 2012 3459 VIEWS


September 16 , 2012 /By Liz Rappaport And Julie Steinberg / WSJ
The career path for aspiring Gordon Gekkos is getting rockier.
Goldman Sachs Group Inc. GS +0.57% is doing away with two-year contracts for most analysts hired out of college, according to communications reviewed by The Wall Street Journal and confirmed by a Goldman spokesman. Analysts also won't get bonuses for completing the program, which has been around for a quarter of a century and has been viewed as a meal ticket to a lucrative Wall Street career.
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 move will affect hiring in Goldman's investment-banking and investment-management divisions. Two-year contracts will remain in use in sales and trading and investment-research divisions, where more analysts have stayed at Goldman rather than leaving the firm for business school or for other jobs.
Analysts are the bottom rung on a ladder that can lead to the top echelons of Goldman, where partners make millions of dollars in annual compensation. Goldman employed 32,300 people world-wide as of the end of June. It has about 400 partners and more than 2,000 managing directors.
In recent years, Goldman analysts were paid about $70,000 in their first year and $80,000 in the second, said people who participated in the program. Analysts joining the firm in the summer could expect a pro-rated bonus for their first months of work in the following January, and they could expect to receive a full bonus the following January. The bonus was often the size of their full salary before the financial crisis. It has shrunk since then. When analysts complete the program they received another final bonus that was pro-rated for their final six months.
For the analysts, the program offered prestige and job security for at least two years. About halfway through the program Goldman would decide who it wanted to promote, allowing analysts who didn't advance to seek other employment while being paid and trained at the firm.
Analysts in the investment-banking division help bankers research companies for deals, putting together presentations, combing through reams of documents, analyzing data and often staying up all night or sleeping on the floor of the office.
Goldman's move is a "disservice" to younger hires because they now need more guidance than ever, said Jenny Cha, who participated in the two-year analyst program from 2000 to 2002 and spent more than a decade at Goldman before leaving this past June as a vice president in operations. Ms. Cha, 34 years old, is looking for jobs and weighing a career change.
Goldman has been a popular destination for students at top colleges. One-third of graduates from the 2011 undergraduate class at University of Pennsylvania who took jobs went into financial services, according to a survey of 2,043 students from that class who indicated a career plan. Goldman was the second-largest employer, behind Teach for America, with 33 students taking jobs there.
In recent years, private-equity firms have become more aggressive in recruiting Goldman analysts, said people in the private-equity industry. The companies used to begin recruiting from Goldman's analyst program in March of the analyst's first year. Lately, some firms advanced their initial overtures to January, when analysts have only been working at Goldman for about six months.
Several members of Goldman's management committee began as analysts at the firm, including Mr. Weinberg, who is a vice chairman of the firm and co-head of Goldman's investment bank, and Gene T. Sykes, who runs Goldman's mergers and acquisitions business globally.



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