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Wall Street's two-year analyst program is the stuff of undergraduate legend.
The deal: Give a bank your waking hours for a finite period of time, in which one is guaranteed nearly six figures in compensation and a rigorous boot camp in high finance. That honest bargain created a decades-old institution that provided many a first job for executives across a wide variety of industries beyond Wall Street.
But as regulation mounts, pay stalls, and industries like technology, media and consulting compete for talent, young and restless analysts are throwing in the towel, leaving banks with a new dilemma of how to keep them.
Take Chris Martinez. A 2010 graduate of Wisconsin, Martinez joined a group working on mergers in the tech, media and telecoms sector. Martinez worked on high-profile deals around the clock, pulling more all-nighters than he could count. Within seven months, Martinez had secured a job at private equity firm Apax Partners and, though interested in the content of the work he did, began counting down days to better hours.
"It's almost expected that an analyst, especially in their first year, is just going to be miserable," Martinez told CNBC. High achievers hand over the keys to their lives to do "repetitive, simple work" on Excel spreadsheets, he said. He estimated that only 5 percent of his work made it to his group's corporate clients.
"The fundamental nature of the work makes it very difficult for the job to compete with many other jobs out there," Martinez said.
Around the time Martinez was leaving, Goldman executives had realized many like him were taking the bank's training and heading to rivals. To stem the exits, it set up a junior banker task force, responsible for conceiving ideas for how to introduce a semblance of work-life balance for the twentysomethings who had previously checked that "life" part of the equation at the door.
Goldman has since suggested analysts aim for a 75-hour workweek (not 100). The bank has also eliminated Saturday work, unless the analyst is on a live deal. The most notable outcome: the end of Goldman's two-year trainee program, which has roots in the 1980s. Graduates will now join as full-time employees, instead of as contractors.
"It's almost expected that an analyst, especially in their first year, is just going to be miserable."
"If more banks moved in the direction of breaking down this two-year program, they'd be better off," said Adam Grant, a behavioral expert and professor at the University of Pennsylvania's Wharton School, noting that employees join with only short-term goals in mind. "If Wall Street doesn't change, it will be the next dinosaur." Grant has been so vocal on the topics of burnout and employee morale that Goldman sought his counsel when it was looking to implement more changes in 2013.
At his suggestion, the firm is now conducting "entry interviews" with new joiners, attempting to curtail unnecessary face time. Grant wanted to go even further, to have the analysts rank their managers and do away with those higher-ups who were especially toxic. However, Goldman rejected the idea, Grant says, because it didn't want to have to ditch managers who were top producers.
It's not just Goldman's problem. All of Wall Street's banks have been grappling with how to stem the flight of analysts as constant industry vilification and regulation have meant there aren't the risks — or, more importantly, rewards — that once existed. Entry-level analysts who join investment banks following financial crises earn less overall in their careers than those who join in good times, according to 2008 research by Stanford's Paul Oyer.
Oyer estimates investment bankers graduating into a bull market earn up to $5 million more over time than those who join during downturns. Mark Horney at Columbia Business School says bull markets see more of these "shoppers" — students who choose Wall Street because of its pay or cachet, not because they like the core content of the work. Oyer found that in his research, too.
"When times are lean on Wall Street," Oyer writes, the group of applicants interested in Wall Street as a quick payday "shows less interest in working there."
Between 2012 and 2013, the number of MBA candidates who planned to head to Wall Street fell across the top business schools, dropping by 8 percentage points at Harvard Business School alone. The trend at the undergraduate level is even more drastic: For instance, the percentage of Princeton graduates going into finance fell 14 percentage points between 2006 and 2011.
Kevin Roose, a writer for New York Magazine, explores these issues in his new book "Young Money." Roose followed eight analysts into the two-year trenches and found that, while most went to Wall Street in search of financial security, by the end of their two years "they just want some sleep." For others, Wall Street is simply intellectually rigorous prep for an unrelated career — one of the main types of flight investment banks are now trying to stem.
"These banks often recruit top talent, treat them like crap after investing quite a bit of money in training them, and continue to do it year after year."
Graham Carroll, an MBA student at UNC's Kenan-Flagler business school, spent three years at Bank of America Merrill Lynch in the first analyst class following the firms' hurried merger. In order to keep top talent in the 24-person financial institutions group around longer, the bank created a rare third-year analyst position, a mezzanine level of sorts.
But Carroll realized that, fundamentally, he wanted to do something entrepreneurial — not something ever more senior within the bank's bureaucratic strata. He and his brother have tiptoed into the business of recycling electronics but are now steering toward something more financial. "I didn't see the managing director I worked for as an idol of sorts, that I wanted to do what he did in 10, 12, 13 years," Carroll said.
While admitting it's not for everyone, Carroll said he would "100 percent recommend" an analyst program to any graduate, as long as they were ready to make the lifestyle sacrifices in the short term. "What gets lost in translation a lot of times is that the job is a great job." Other analysts with less bullish perspectives preferred to remain anonymous, since they still do business with their former employers, but provided much the same responses.
"They eat their young. They're being nicer about it, but it's still a meritocracy."
"I figured I could do anything for two years, but only two years," said one former JP Morgan analyst.
Banks are hoping that changes to analyst programs will be viewed as a positive structural change. While their private responses have been mixed — executives at one bank recalled "snickering" while others felt "relief" at Goldman's taking the initiative — the public responses have been unified: Nearly every bulge-bracket firm has taken steps toward, at the very least, reducing weekend work. Unfortunately, many of the changes seem to be a mile wide and an inch deep.
Beyond the internal memos issued within the banks, Bank of America, Credit Suisse, Citigroup and JP Morgan Chase have declined to make executives available to discuss the efforts, or elaborate on them on the record.
"They eat their young," said Brad Hintz, an equity research analyst covering the financials, whose curriculum vitae includes partner at Morgan Stanley and CFO of Lehman Brothers. "They're being nicer about it, but it's still a meritocracy."
Wharton's Grant says the moves are a step in the right direction, but e-mails like one he received over the President's Day holiday still raise eyebrows. In the e-mail, a first-year analyst at an unnamed bank contacted Grant after reading about his work with Fortune 100 companies.
The analyst had been brainstorming ways to improve morale within his own firm — like catered lunches or out-of-office events — but found his ideas dead on arrival when he tried to suggest them to his bosses. Most of the talk about a groundswell of cultural change was simply "PR stunts."
"These banks often recruit top talent, treat them like crap after investing quite a bit of money in training them," the analyst concluded, "and continue to do it year after year."