How to Survive Wall Street's Robot Revolution: QuickTake Q&A

(Bloomberg) -- Wall Street’s robot revolution has begun. JPMorgan Chase & Co. is rolling out a program called LOXM that executes equities trades so well, it’s replacing the humans who used to do that. Goldman Sachs is in the midst of automating the initial public offering process. Innovations in financial technology -- fintech -- are creating competition in fields long dominated by the institutions. Vikram Pandit, who ran Citigroup Inc. during the financial crisis, says technological advances could make 30 percent of banking jobs disappear in five years. David Siegel, co-founder of quant hedge fund Two Sigma, is worried that machines will soon make swaths of the workforce obsolete. But all hope is not lost.

1. What makes robots qualified for Wall Street work?

Artificial intelligence, a branch of computer science that aims to imbue machines with aspects of reasoning. Today, the term includes machine learning, which is the ability for computers to learn by ingesting data, and natural language processing, the ability to read or produce text. Robotic process automation is a more simple form of AI that performs rote tasks like answering administrative requests.

2. Who is most at risk of losing their job to a robot?

The first to go will be those with roles that are repetitive in nature: support functions, back-office processing, producing reports that rely on structured data. (At JPMorgan, bots will handle 1.7 million requests this year, doing the work of 140 people, for tasks such as resetting employees’ passwords.) Accountants who “spend a lot of the time basically being an abacus” were singled out by Deutsche Bank AG Chief Executive Officer John Cryan as being at risk of losing their jobs. McKinsey & Co. partner Jared Moon predicts that technologies sweeping through investment banks will relieve rank-and-file employees of about a third of their current workload.

3. Who else should be worried?

Consider the junior investment banker, who spends much of his or her time collecting and analyzing data and then creating reports. Consulting firm Kognetics found that investment-banking analysts spend almost half of their 16-hour days on tasks like modeling and updating charts for pitch books. Machine learning programs are already very good at this. Workers in compliance and regulation have a different worry: Over the last five years, their ranks have doubled, while overall headcount at banks declined 10 percent. Automating those activities — so-called regtech — could be good news for financial institutions looking to control the rising cost of compliance, and bad news for people looking to keep their jobs.

4. What jobs are most threatened by fintech?

Startups including LendingClub Corp. and On Deck Capital Inc. pioneered online lending, quickly matching consumers looking to borrow with people looking to make a profit on interest. Now, banks are looking to compete, announcing their own online loan portals and inking partnerships with fintech companies. That makes loan officers and clerks among the professions most vulnerable to automation.

5. Is there good news for anybody?

Management consultant Opimas LLC says as many as 27,000 new jobs will be created for technology and data workers. New jobs like machine-learning engineers and data scientists are increasingly in demand. American banks are investing more in AI than European or Asian banks, so they will potentially see market share gains, according to Moon.

6. What’s the strongest case for keeping humans at the wheel?

It’s still hard to automate empathy or trust, so as long as clients want to phone a salesperson, people will have jobs. Transactions in commodities, bonds that trade infrequently and more exotic types of credit are harder to automate. Computers are learning to understand bond covenants and court documents, but contract interpretation remains a challenge. In cases where institutional buyers want to make a large block trade, or are particularly interested in discretion, they will still want to call on human traders. But banks are working on cataloging such conversations so computers get better at anticipating client desires.

7. How should those starting out in finance prepare?

“Be tech-savvy, be client-savvy or be data-savvy,” says Richard Johnson of Greenwich Associates. In other words, learn to work with the tech as banks deploy it across their business. Focus on relationship management, which probably can’t be done by computers. Or focus on data science, helping banks analyze the information that AI needs. McKinsey’s Moon is more blunt: “Learn to code in Python,” the programming language used by investment banks.

The Reference Shelf

• QuickTake explainers on fintech, machine learning and robo-advisers.
• The Opimas report, "Artificial Intelligence in Capital Markets: The Next Operational Revolution."
• A Bloomberg News story and Gadfly column on Goldman’s automation of IPOs.
• A hot new degree: Ph.D. in data science.
• Find out if your job will be automated.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net, Jenny Surane in New York at jsurane4@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Laurence Arnold

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