Reality bites - 500 US trainee brokers told to take a hike

Morgan Stanley has sacked half its trainee brokers in America. Could the same thing happen to graduate trainees at banks in the UK? Of course, say recruiters.

500 of 1,000 trainees at Morgan Stanley's US wealth management arm have been unceremoniously dumped according to an article in The Times. The move follows the appointment of a new head of the bank's wealth management arm in the wake of poor performance of the division.

If the market dictates ...

Removing 50% of trainees is no mean feat. But recruiters in London say it has happened before, and will almost certainly happen again. "Banks make drastic cuts whenever the bottom falls out of the market," says Noel Marshall, managing director, banking and financial markets at recruitment firm Finance Professionals.

He adds: "In 2001 it was a bloodbath: if you were working in M&A and corporate finance, or equity research, you were screwed."

When markets turned down in 2001, some banks cut 30-man teams down to five people, says Marshall. Many of the losers were graduate trainees.

How safe are UK trainees?

The good news is, that with markets booming and junior staff hard to come by, banks aren't about to take a hatchet to the trainee population in the near future. In a few years' time, however, it could be a different matter.

Logan Naidu, a consultant at London recruitment firm Cornell Partnership, forecasts another 12-18 months of good times before the next cull. "Everyone knows banking is cyclical. Right now, it's just about getting bums on seats and doing the deals," he says. "Quality control is already slipping and the more bums that come in, the more that will go out again."

Could Compliance be the answer?

Until then, recruiters say the risk of losing your job must be weighed up against the rewards of working in an investment bank. And if you don't want to take that risk, you'll need to accept a smaller reward. Areas like compliance are less susceptible to cuts during the downturn, says Marshall. But compliance specialists do not become millionaires.