Look out graduates, Wall Street banks don’t need you any more
Accenture estimated that artificial intelligence could replace or supplement nearly three-quarters of employees’ working hours.
Pulling all-nighters to craft PowerPoint presentations. Punching numbers into Excel spreadsheets. Finessing the language on esoteric financial documents that may never be read by another soul.
Such grunt work has long been a rite of passage in investment banking, an industry at the top of the corporate pyramid that lures thousands of young people every year with the promise of prestige and pay.
Some of Wall Street’s big banks are testing AI tools that can largely replace their armies of analysts. AP
Until now. Generative artificial intelligence – the technology upending many industries with its ability to produce and crunch data – has landed on Wall Street. And investment banks, long inured to cultural change, are rapidly turning into exhibit A on how the new technology could not only supplement but supplant entire ranks of workers.
The jobs most immediately at risk are those performed by analysts at the bottom rung of the investment banking business. They put in endless hours to learn the building blocks of corporate finance, including the intricacies of mergers, public offerings and bond deals. Now, AI can do much of that work speedily, and with considerably less whining.
“The structure of these jobs has remained largely unchanged at least for a decade,” says Julia Dhar, head of BCG’s Behavioral Science Lab and a consultant to big banks experimenting with AI. She says the inevitable question is: “Do you need fewer analysts?”
Some of Wall Street’s big banks are asking the same question, as they test AI tools that can largely replace their armies of analysts by performing in seconds the work that now takes hours, or a whole weekend. The software, being deployed inside banks under code names such as “Socrates”, is likely not only to change the arc of a career, but also to essentially nullify the need to hire thousands of college graduates.
Executives at Goldman Sachs, Morgan Stanley and other banks are debating how deep they can cut their incoming analyst classes, according to several people involved in the discussions. Bank insiders, and others, have suggested they could cut back on their hiring of junior investment banking analysts by as much as two-thirds, and slash the pay of those they do hire, on the grounds that the jobs won’t be as taxing as before.
“The easy idea is you just replace juniors with an AI tool,” says Christoph Rabenseifner, the chief strategy officer for technology, data and innovation at Deutsche Bank. But he adds that human involvement will remain necessary.
Representatives for Goldman, Morgan Stanley, Deutsche Bank and others say it is too early to comment on specific job changes. But consulting giant Accenture estimates that AI could replace or supplement nearly three-quarters of bank employees’ working hours.
Goldman is “experimenting with the technology”, says spokesman Nick Carcaterra. “In the near term, we anticipate no changes to our incoming analyst classes.”
JPMorgan CEO Jamie Dimon wrote in his annual shareholder letter this month that AI “may reduce certain job categories or roles”, and labelled the technology top among the most important issues facing the nation’s largest bank. He compared the consequences of AI with those of “the printing press, the steam engine, electricity, computing, and the internet, among others”.
Gruelling and glamorous
Investment banking is a hierarchical industry, and banks typically hire young talent through two-year analyst contracts. Tens of thousands of 20-somethings (from undergraduate and MBA programs) apply for about 200 spots in each big bank’s program. Pay starts at more than $US100,000 ($156,000), not including bonuses.
If they persevere, they move up the ranks to associate, then director and managing director; a handful end up running divisions. Although gruelling, the life of a senior banker can be glamorous, involving travelling around the globe to pitch clients and working on big-money corporate merger deals.
Many who get through the two-year analyst program have gone on to become business titans – billionaires Michael Bloomberg and Stephen Schwarzman began their careers in investment banking. But a majority will leave before or after their two years are up.
There are jokes among junior bankers that the most common tasks of the job involve dragging icons from one side of a document to another, only to be asked to replace the icon over and again.
“One hundred per cent drudgery and boring,” says Gabriel Stengel, a former banking analyst who left the industry two years ago. Val Srinivas, a senior researcher for banking at Deloitte, says a lot of the work involved “gathering material, poring through it, and putting it through a different format”.
Gregory Larkin, another former banking analyst, says the new technology will start “a civil war” inside Wall Street’s biggest firms by tilting the balance of power to technologists who program AI tools, as opposed to the bankers who use them – to say nothing of technology giants such as Microsoft and Google, which licence much of the AI technology to banks for hefty fees.
“AI will enable us to do tasks that take 10 hours in 10 seconds,” says Jay Horine, co-head of investment banking at JPMorgan. “My hope and belief is it will allow the job to be more interesting.”
AI’s impact on finance is simply one facet of how the technology will reshape the workplace for all. AI systems, which include large language models and question-and-answer bots such as ChatGPT, can quickly synthesise information and automate tasks. Virtually all industries are beginning to grapple with it to some degree.
?Kitty Hawk moment’
Deutsche Bank is uploading reams of financial data into proprietary AI tools that can instantaneously answer questions about publicly traded companies and create summary documents on complementary financial moves that might benefit a client – and earn the bank a profit.
Horine says he could use AI to identify clients that might be ripe for a bond offering, the sort of bread-and-butter transaction for which investment bankers charge clients millions of dollars.
Goldman Sachs has assigned 1000 developers to test AI, including software that can turn what it terms “corpus” information – or enormous amounts of text and data collected from thousands of sources – into page presentations that mimic the bank’s typeface, logo, styles and charts. One firm executive privately calls it a “Kitty Hawk moment”, or one that will change the course of the firm’s future.
That isn’t limited to investment banking. BNY Mellon executive chairman Robin Vince said recently that his research analysts could now wake up two hours later because AI can read overnight economic data and create a written draft of analysis to work from.
Morgan Stanley’s head of technology, Michael Pizzi, told employees in January that he would “get AI into every area of what we do”, including wealth management, where the bank employs thousands of people to determine the proper mix of investments.
Many of those tools are still in the testing phase and will need to be run past regulators before they can be deployed at scale.
Bank of America CEO Brian Moynihan said last year that the technology was already enabling the firm to hire less.
Among Goldman Sachs’ sprawling AI efforts is a tool under development that can transfigure a lengthy PowerPoint document into a formal “S-1”, the legalese-packed document for initial public offerings required for all listed companies.
The software takes less than a second to complete the job.
Rob Copeland is finance reporter writing about Wall St and the banking industry.
This article originally appeared in The New York Times.
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