Hard Times for Wall Street's 'Sell Night' Recruits

In late July, Goldman Sachs (GS) hosted an exclusive dinner for recent college graduates at a Ruth's Chris restaurant in midtown Manhattan. While the chain steakhouse might have seemed déclassé for veteran Wall Street traders accustomed to 21 or Delmonico's, it was a big draw for bright-eyed recruits who may never know such grandeur. Some even checked the menu online in anticipation.

Once upon a pre-TARP age, late summer on Wall Street meant that top recruits were filling their schedules with company-underwritten evenings at New York's top restaurants. "They would take us to Yankees games, and we thought that was huge," says Allison Levine, a former Goldman Sachs trainee and founder of leadership consultancy Daredevil Strategies. Other firms hired buses equipped with leather sofas, strobe lights, disco balls, and karaoke machines to shuttle invitees to the VIP lounges of exclusive downtown nightclubs. Lincoln Town Cars would take others to the champagne rooms of adult entertainment emporiums Scores and The Penthouse Club. Some could even enjoy a relaxing "booze cruise" on the Hudson or East River. Amid such settings, free-spending senior bankers would pitch the recruits on the benefits of their firm over another.

This time-honored ritual, known as "sell night," provided megabanks and boutiques alike with the perfect backdrop for tendering their professional compact. Senior bankers would offer their firm's prestige and hefty starting salaries—and the implicit promise of future extravagances—in exchange for two to three years of uninterrupted work.

In the postlapsarian summer of 2010, however, fresh hires and interns on Wall Street are settling for Ruth's Chris or—more often—nothing at all. "I remember the old days," says Luis M. Yanez, managing director of Los Angeles-based investment firm Wellworth Capital and a veteran of big nights out on Goldman, Merrill Lynch (BAC), and others. "Being flown to Miami, thousands on dinner, clubs, bottle service, nice wine. No expense seemed like too much. Now it's hard to get taken out for a burger, fries, and some beers."

None of these lavish outlays ever made much of a dent in the bottom line. However, banks' fear of appearing profligate after taking taxpayer dollars has, to the chagrin of an emerging generation, ended sell night. Or, to take an optimistic view, put it on hiatus. "The booze cruises, models, and bottle service are history," reports Alison Seanor, a managing director at Wall Street headhunter Glocap Search. "The glory days are gone—at least for now." Says Danny Sarch, a veteran bank talent scout who runs Leitner Sarch Consultants: "It's a different era. You can't be seen as wasteful or irresponsible. Not now."

Jenny Van Leeuwen Harrington, a former Goldman broker and current chief executive officer and portfolio manager of investment boutique Gilman Hill Asset Management, says many of her former colleagues remain "extremely hesitant" to expense legitimate networking meals at posh restaurants. Some even prefer paying out of pocket to having swanky establishments such as Abe & Arthur's appear on their expense reports. "They don't want to risk being seen there," she says.

Being written up in the New York Post's Page Six for dining at the meatpacking district restaurant is one thing. These days, however, it's generally understood that if you're busted for entertaining at The Penthouse Club, you might as well go work for Amway. "Deutsche Bank (DB) does not approve of adult entertainment of any kind and will not repay such expenses," read a 2008 directive from the firm that also instructed traveling bankers to shower at the airport instead of paying extra to check in early at their hotels.

As a result, many businesses are experiencing a noticeable drop-off in revenue. Earlier this year, steakhouse Smith & Wollensky took out a full-page ad in The New York Times inviting investment bankers to pay their bills with stock certificates. "It used to be no big deal," says Angelina Spencer, a former Penthouse Club owner who is executive director of the Association of Club Executives, a trade group for adult venues. "Now you just don't see the corporate cards and the several-thousand-dollar parties. Wall Street is certainly a lot shyer." Says Michael Cetta, manager of Sparks Steakhouse and a fellow victim of sell night's demise: "Anyone who tells you business has not fallen off is either crazy or lying."

By paying for the sins of their forebears, the aspiring new guard of Wall Street has lost out on what once seemed a birthright. "Dinners these days, whether you're a young prospect or a client, are so few and far between," says Yanez. "The banks are so afraid of getting into trouble."

Wall Street's new sobriety has already had a pronounced effect on recruits. All of those interviewed for this story refused to give their names for fear it would cost them a job offer. With fewer openings than in years past, each spot is hotly contended. Even so, no one wants to be caught celebrating when their colleagues are left in tears without an offer—especially those who have served their second internship. While the situation may not be what it was, "it looks worse than ever to complain," says Yanez. "Trading and banking jobs are not easy to come by."

Consequently, interns and young traders are celebrating much more modestly. UBS hosted a trivia night at an Irish pub featuring free appetizers. One group from JPMorgan recently planned a celebratory trip to Philadelphia to play skee ball at arcade chain restaurant Dave & Buster's. They considered splurging on a Zipcar—until scrapping the idea when so few received offers.

Glocap's Seanor says sell night has morphed into the "sell drink" instead. Increasingly, young analysts, bankers, and traders—who make the endeavor cheaper, she says, because they prefer beer to hard liquor—take prospective hires out to make a take-it-or-leave-it case for their bank. Even the private equity shops and hedge funds that Seanor scouts for have largely scotched their spirited woo-fests. In better years, she says, a finance whiz playing the scene in Manhattan could schedule at least 20 such invitations. This year, she estimates, the average is barely five.

According to Sarch, there are two reasons for this demise. First, Wall Street's resurgent entrepreneurialism has led to the rise of investment boutiques, such as Fieldpoint Private Bank & Trust and HighTower, that have startup-like cost structures and expense policies. Second, bulge-bracket firms such as Goldman can recruit overqualified, recently laid-off bankers without overextending themselves. "People are anxious to get a job," he says. "You don't have to do the kind of wooing you used to."

Interns aren't the only ones losing out. To preserve remnants of a fleeting culture, many veteran bankers have resorted to "soft-dollar" solutions. One recent trend is including recruits on lavish steak dinners—hosted by the firm's clients.

Alas, for all the promise of Goldman's dinner at Ruth's Chris, only drinks and hors d'oeuvres were served, blindsiding the veteran traders who showed up to mingle with the recruits. After leaving the party, one candidate consoled himself with a $5 footlong sandwich from Subway on the train ride home. "You feel for the new hires," says Yanez. "It's gone from one extreme to another."

With Sommer Saadi and Alexandra Wolfe

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