Goldman Sachs is likely to pay its analysts less now. Is this a HUGE MISTAKE?
Goldman Sachs is at the vanguard of a revolution in the way investment banks treat their juniors. As we reported earlier, the US bank is discouraging its junior staff from working evenings and weekends.
As part of its all new approach, Goldman will be hiring 40 more analysts in 2014 than it did in 2013. More analysts = more people to spread the work around = less likelihood that any particular individual will work a 120 hour week.
So far, so good. However, it's worth noting that the young people who go into banking don't seem especially bothered about work-life balance. Research by Universum, a Swedish company which specializes in monitoring student preferences, shows that in the U.K., the U.S. and Germany, students go into banking for the money, not for the opportunities for weekend breaks.
Goldman has been fully-aligned to this student mindset. Salary surveys indicate that the U.S. bank is one of the best payers at the analyst level, paying £75k ($122k) in total compensation for first year M&A analysts, versus 'just' £70k (or less) at the likes of Deutsche and Barclays. Only JPMorgan pays its average analyst more than Goldman Sachs, according to salary benchmarking firm Emolument.
If they cost $122k each, Goldman's additional 40 analysts will cost the firm $4.9m. That looks steep, particularly in light of Goldman's recent bad quarter. It seems highly likely, therefore, that Goldman's new analysts will coincide with a reduction in average analyst pay. Is this really what nascent bankers want? You tell us.