The elite students and no-hopers of Goldman and JP Morgan

Cecilia – Graduate Trainee – Fixed Income Investments

If you had been wondering what the balance between fear and greed was among young people today, the statistics on graduate applications to investment banks might shed some light. On the one hand, since this time last year the banks have rapidly and repeatedly increased the salaries they’re offering to new recruits. On the other, a banking career looks somewhat riskier than it did 12 months ago, and publicity about working conditions hasn’t got any better. So, which of the two effects won out?

The answer is … ambiguous. According to data crunched by Financial News, applications to Morgan Stanley, Credit Suisse and HSBC were down, while Goldman Sachs and JP Morgan were up on last year, Citi was flat and Bank of America declined to comment. Since there were likely to be some firm-specific perception issues in play – constant bad headlines at CS, geopolitical uncertainty with respect to Hong Kong at HSBC – it looks like kids are still keen on the industry.

But the real question which might be raised from looking at the data might be something more like – do any of these numbers make sense? For Goldman Sachs, the global internship program received 236,000 applications for 3,000 places. At JP Morgan, it was 270,855 applications for 4,604 places, of which 54,000 applications went in for the 480 places in the investment bank. Across the industry, even at the firms which saw slight year-on-year falls, the norm seems to be that the crude percentage chance of getting accepted to an investment banking graduate program is a bit more than 1%, but significantly less than 2%.

By comparison, the acceptance rate at Harvard is 5%, Oxford University is 17.5% and for the Navy SEALs it’s about 6%. This might be considered a good thing for the industry, in so far as it represents a conscious attempt to broaden the pool of applicants and take the very best of the best from a wider range of young people. On the other hand, there needs to be a reality check here – in any given year, does it really seem likely that there are nearly a quarter of a million people graduating who would have a realistic chance of making a career at Goldman Sachs?

And if the answer is no, then the challenge to graduate recruiters is almost impossible. No matter how hard they work, there has to be some degree of arbitrariness in the process by which the mountain of applications is cut down to a manageable number which can be given serious attention. It’s pretty likely that the ones who are accepted are, indeed, among the very best. But when you have so many applications to reject, you can be pretty sure that there are also some great candidates among the ones that got thrown away without a proper look.

No wonder there is such a growth industry in algorithmic scoring, video interviews and artificial intelligence for recruitment. Perhaps it’s the modern equivalent to the process apocryphally used by a famous hedge fund manager, who used to throw applications up in the air and pick up the ones that landed right side up. His reasoning was simple – “the last thing I need are unlucky traders”.

 Daniel Davies –

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