The future is here: Will robots push out financial analysts from Wall Street

At the end of 2013, academicians from Oxford published a study stating that 47% of all working positions in the United States are "at high risk" of automation over the next 20 years. Such conclusions provoked a flurry of publications in the press on how soulless robots rob people of their jobs.

However, the researchers said not only that unskilled workers who perform simple actions, for example, in factories or manufacturing, may lose their jobs. Now software using new approaches like machine learning can do work that has always been considered the prerogative of highly educated and highly paid people who do not do manual labor.
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According to the study, the degree of threat to automation for specific industries varies greatly - it will be impossible to replace a live doctor who communicates with a patient for a very long time (and not the fact that this is possible at all). But clerks in law offices that analyze the paper - it can be completely replaced.

But most of all, according to researchers, it is necessary to worry employees of the sphere of finance. Its highest degree of automation and technology penetration now threatens up to 54% of working positions.

A software that knows everything

In February of this year, the publication of the New York Times told the story of the developer of the analytical system Kensho Daniel Nadler. His system collects and analyzes information that may affect the change in the situation on the stock market - and then generates recommendations for transactions.

Earlier, when a major client of an investment company called his broker and asked, for example, how the price of the shares he bought from energy companies could be affected by another exacerbation of the situation in oil-producing areas, say Syria, he could get an answer based on the broker’s personal impressions or he could call to the aid of the analyst. Such advice could be accurate, but there was always a risk of human error — the employee could not take into account some important factor.

To reduce the likelihood of error in each case, it was necessary to conduct a deep study of similar events and how they influenced the market. However, the disadvantage of this approach was that by the time analysts could formulate investment advice, the opportunity for its use could have been lost for a long time.

Now, companies like Goldman Sachs are starting to use analytical systems like Kensho. With their help, you can drive in a search query of interest (for example, “Syria”), and immediately see the issue of events related to this topic. It looks like Google, which shows content on the web based on a search query.

Kensho is increasingly being used at Goldman Sachs and the creator of the program, Nadler, is convinced that analysts at this and many other financial companies should worry about their future. He predicts that within a decade, between one-third and one-half of the employees of financial companies on Wall Street will lose their jobs due to Kensho and other similar systems.

The sphere of finance has already undergone similar transformations - at first clerks and brokers who were engaged in selling and buying stocks over the telephone lost their jobs. According to a source in the NY Times in the same Goldman Sachs, there are only four such people left, and there were about 600. In addition, many traders who have themselves been operating in the market left him, giving way to trading robots.

Now it is the turn of financial analysts - the new software is able to study and analyze many times more data in much less time. And the reliability of this analysis is also higher, says Nadler. He is also convinced that the layoffs can not be avoided and employees of financial companies who work with investors - if they can communicate with a clever analytical system that makes almost no mistakes, few people will want to spend their time on people.

A few months ago, Anthony Jenkins, who was previously dismissed from his post as CEO of the largest British bank Barclays, spoke at the conference. His presentation was devoted to the "uberization" of the financial industry, that is, the impact on it of new technologies.

“According to my forecast, the number of divisions and employees working in financial companies can be reduced by 50% in the coming years,” he said from the scene. And even with a more optimistic scenario, at least 20% of workers will lose their seats due to the development of technology. ”

Desire to save

One of the incentives to introduce innovative analytical tools can be a desire to save. For several decades, the management of foreign finance, which many investment companies specialize in, was more than a profitable business. According to the consulting company BCG, the profitability of the asset management industry reached 39% in 2014 (for comparison, the profitability of consumer goods sales at the same time did not exceed 8%, and pharmaceuticals - 20%). According to various estimates, the industry’s total profit in 2014 amounted to $ 102 billion. In addition, the foreign finance management industry is growing rapidly: companies are now “watching out” for $ 78 trillion worldwide, and by 2020 this figure can grow to $ 100 trillion

All this led, in particular, to the fact that financial companies and asset managers requested higher and higher commissions from their clients. As markets grow, customers may overlook the impact of commissions on net profit, and nothing threatens the incomes of asset managers. But in the past year, most markets significantly reduced growth rates or fell.

Consulting company McKinsey reported that in 2015, the growth rate and profit level of many US asset management firms decreased. Morningstar reports that in 2015, active managers were faced with an “outflow” of more than $ 100 billion of managed capital. Another $ 400 billion was transferred under the "passive" management, which involves tracking stock indices and investing in them. However, this did not help those who invested in the securities of sovereign funds of countries exporting natural resources. Compensating for lost income after the collapse of global commodity prices is almost impossible. It was hard for firms specializing in the stock market: Aberdeen Asset Management, one of the largest investment funds in Europe, lost 14% of the managed funds, Ashmore Group - 19%.

The introduction of new technologies makes it possible to reproduce financial management strategies at a much lower cost. At the moment, programs are able to replace, for example, those managers who are trying to “beat” the market by buying cheap stocks with a high estimated yield. A computer program is much faster in analyzing the stock market, which looks cheap in relation to the profits of releasing their company to the company, the value of its assets or the dividends paid by it. In addition, the system can use in trading not only stocks, but also for example, the so-called structured products . Investors will no longer need to worry that the manager or analysts of the investment company may look at something or act in a manner inconsistent with the approved strategy.

In the case of a choice between asset markets, a robo-consultant, relying on computer computing models, will also be able to help investors manage their capital, and for a very low fee.

Perspectives

Investments in technological developments in the field of finance (“fintech”) tripled in the period from 2013 to 2014, reaching $ 12.2 billion. New startups are working to optimize every link in the entire financial system. With the help of special software, banks decide whether to lend to a potential borrower, insurance companies offer tariffs based on driving style data collected by special means, and so-called robo advisors help investors form a portfolio of securities - every tacon leaves no innovation work a number of qualified employees.

And the fact that Goldman Sachs has become a user of technologies like Kensho speaks volumes, says the creator of Kensho. If such a conservative and somewhat cumbersome company, like Goldman, is ready to trust the software and reject many employees, then employees of not-so-large financial companies can lose their places even faster.

The future is here: Will robots push out financial analysts from Wall Street

A software that knows everything

Desire to save

Perspectives

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