Goldman Sachs has lowered employee compensation as it focuses more on offerings like the Apple Card to help it continue to grow revenue.
CNBC is reporting that the bank has set aside 35 percent of its revenue to handle staff compensation, the lowest ratio it has paid employees in more than a decade. The company has said the lower compensation will continue as it focuses on software.
The average Sachs employee received $246,216 for the first half of the year, compared to $527,192 for the same time period in 2009. The news illustrates the shift in how Wall Street firms are doing business in the age of algorithms and artificial intelligence (AI).
Trading has not been as fruitful as it has been in the past, especially after the financial crash and in light of new rules governing banks. Central banks have affected the markets and hedge-fund bets are discouraged.
Also, up-and-coming firms like Virtu and XTX do the same work as human traders but faster, using coders instead of stockbrokers.
“We are in the midst of the biggest marriage of tech and finance in history,” said Mike Mayo, a veteran bank analyst at Wells Fargo. “It means more bots relative to bankers, more machines, more automation, more scale. The next decade will see the implementation of technology to a greater extent and in ways that have never been done before.”
Goldman Sachs used to have one initiative when it came to hiring: to recruit the most talented employees. That has changed as the bank goes through a complete shift of priorities and moves away from human workers. Goldman has been working to find new sources of revenue and to reinvent itself in a digital world.
“As we grow more platform-driven businesses, we expect compensation to decline as a proportion of total operating expenses,” CFO Stephen Scherr told analysts on Tuesday (Oct. 15). “Platform businesses should carry higher marginal margins at scale and be less reliant on compensation.”