Pulling all-nighters to put together PowerPoint presentations. Punching numbers into Excel spreadsheets. Improving the language in internal financial documents that may never be read by another soul.
That kind of grunt 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.
So far. Genetic artificial intelligence—the technology disrupting many industries with its ability to generate and retain new data—has landed on Wall Street. And investment banks, long engaged in cultural change, are quickly turning to Exhibit A for how the new technology could not only complement but replace entire ranks of workers.
The jobs most at risk are those performed by analysts on the lower rungs of investment banking, who spend endless hours learning the ins and outs of corporate finance, including the intricacies of mergers, public offerings and bond deals. Now, AI can do much of this work quickly and with much less fuss.
“The structure of these jobs has remained largely unchanged for at least a decade,” said Julia Darr, head of BCG’s Behavioral Science Lab and an adviser to major banks experimenting with artificial intelligence. The inevitable question, as he put it, is “do you need fewer analysts?”
Some of Wall Street’s big banks are asking the same question as they test artificial intelligence tools that can largely replace their armies of analysts, performing in seconds work that now takes hours or an entire weekend. The software, developed at banks with code names like “Socrates,” has the potential not only to change the arc of a Wall Street career, but to essentially negate the need to hire thousands of new college graduates.
Top executives at Goldman Sachs, Morgan Stanley and other banks are discussing how deeply they can cut their incoming analyst ranks, according to several people involved in the ongoing discussions. Some inside those banks and others have suggested they could cut their hiring of junior investment banking analysts by as much as two-thirds and cut the pay of those they do hire, arguing that the jobs won’t be as taxing as before.
“The easy idea,” said Christoph Rabenseifner, Deutsche Bank’s chief technology, data and innovation strategist, “is just to replace young people with an AI tool,” though he added that human involvement will remain necessary .
Spokesmen for Goldman, Morgan Stanley, Deutsche Bank and others said it was too early to comment on specific job changes. However, consulting giant Accenture has estimated that AI could replace or supplement almost three-quarters of the working hours of bank employees across the industry.
Goldman is “experimenting with the technology,” said Nick Carcaterra, a spokesman for the bank. “In the near term, we do not expect any changes to our incoming analyst categories.”
This week, JPMorgan Chase chief executive Jamie Dimon wrote in his annual letter to shareholders that artificial intelligence “may reduce certain categories of jobs or roles” and named top technology among the most important issues facing the biggest bank of the country. Mr. Dimon compared the consequences to those of “the printing press, the steam engine, electricity, computers and the Internet, among others.”
Investment banking is a hierarchical industry, and banks typically hire young talent through two-year analyst contracts. Tens of thousands of 20-somethings (from both undergraduate and MBA programs) apply for about 200 positions in each major bank’s program. Pay starts at more than $100,000, not including year-end bonuses.
If they persist, they rise through the ranks to partner, then to director and CEO. a handful end up running sections. Although grueling, the life of a senior banker can be glamorous, involving traveling the world to pitch clients and working on big-money corporate merger deals. Many who go through the two-year analyst program have gone on to become corporate titans — billionaires Michael Bloomberg and Stephen Schwarzman began their careers in investment banking — but the majority will leave before or after the two years are up, bank officials said.
There are jokes among junior bankers that the most common tasks on the job involve moving icons from one side of a document to the other, only to be asked to replace the icon again and again.
“One hundred percent dull and boring,” said Gabriel Stengel, a former banking analyst who left the industry two years ago. Val Srinivas, senior banking researcher at Deloitte, said much of the work involved “gathering material, punching it and putting it in a different format”.
Gregory Larkin, another former banking analyst, said the new technology would start “a civil war” at Wall Street’s biggest firms, tipping the balance of power toward the technologists who program AI tools, as opposed to the bankers who use them. tech giants such as Microsoft and Google, which license much of their AI technology to banks for high fees.
“Artificial intelligence will allow us to do tasks that take 10 hours in 10 seconds,” said Jay Horine, co-head of investment banking at JPMorgan, describing the analyst jobs. “My hope and belief is that it will allow the work to be more interesting.”
AI’s impact on finance is just one aspect of how technology will reshape the workplace for everyone. AI systems, which include large language models and question-and-answer bots like ChatGPT, can quickly synthesize information and automate tasks. Almost all industries are beginning to struggle with this to some degree.
Deutsche Bank feeds reams of financial data into proprietary artificial intelligence tools that can instantly answer questions about listed companies and create summary documents for complementary financial moves that could benefit a client – and make a profit for the bank.
Mr. Horine said he could use artificial intelligence to identify clients who might be ripe for a bond offering, the kind of transaction for which investment bankers charge clients millions of dollars.
Goldman Sachs has commissioned 1,000 developers to test artificial intelligence, including software that can turn what it calls “corpus” information — or vast amounts of text and data collected from thousands of sources — into page presentations that mimic the font, logo , the styles and charts of the bank. One company executive privately called it a “Kitty Hawk moment,” or one that would change the course of the company’s future.
This is not limited to investment banking. BNY Mellon’s chief executive said on a recent earnings call that his research analysts could now wake up two hours later than usual because AI can read overnight financial data and create a written analysis draft to work.
Morgan Stanley’s chief technology officer, Michael Pizzi, told employees in a private meeting in January, a video of which was seen by The New York Times, that he “will introduce artificial intelligence into every area of what we do,” including wealth management , where the bank employs thousands of people to determine the right mix of investments for wealthy savers.
Many of these tools are still in the testing phase and will need to pass regulatory authorities before they can be scaled to live work. Bank of America’s chief executive said last year that technology was already allowing the company to hire less.
Among Goldman Sachs’ extensive AI efforts is a tool under development that can transform a lengthy PowerPoint document into a formal “S-1,” the legalized initial public offering document required of all publicly traded companies.
The software takes less than a second to complete the job.
The sound is produced by Patricia Sulbaran.