Robots Taking Over Corporate Finance Jobs

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The 2020s could be an apocalyptic decade for Wall Street as artificial intelligence takes over the most popular jobs in finance

Jobs in banking are some of the most sought after for job seekers — but plenty of roles may not be around much longer.

Algorithms that model prices or build portfolios could wipe out 6 million high-paying jobs in finance, according to Cornell University professor Marcos Lopez de Prado.

Lopez de Prado told the US House Committee on Financial Services that AI might not replace jobs entirely, but current finance employees aren’t trained to work alongside new technology, Bloomberg reported.

Lopez de Prado’s statement aligns with a 2020 report that revealed 1.3 million US finance jobs — particularly customer-service reps, financial managers, and compliance and loan officers — could disappear by 2030, according to a British insights firm IHS Markit. Brookings, too, recently found white-collar employees in tech and finance are more susceptible to AI job loss than social workers, teachers, or cooks.

How AI is set to disrupt the finance industry

Despite a year of scandals that entangled many of the country’s largest banks, the desire to work at these companies remains high, according to a report by LinkedIn. Some of the more high-profile scandals include Deutsche Bank’s alleged involvement in a global money-laundering scheme and accusations against Wells Fargo’s auto-loan and mortgage practices.

Nonetheless, Bank of America, Goldman Sachs, Citigroup, Wells Fargo, and JPMorgan Chase remain five of the most popular places to work in 2020. LinkedIn attributes the popularity to banks offering increasingly tech-focused jobs that attract talented software engineers and developers out of college.

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“The reality is that if somebody wants to learn finance and strategy, these banks are still the places to be trained and developed,” Heather Hammond, co-head of the global banking and markets practice at Russell Reynolds Associates, told LinkedIn.

Jobs in banking as a whole are some of the most expensive in the country. Starting analysts make $91,000 in base pay, while managing directors can earn almost $1 million after bonuses. In fact, the industry could add a whopping $512 billion in global revenue by 2020 with the use of intelligent automation, according to a 2020 report from Capgemini.

Major banks have already begun implementing AI

While the use of AI remains sparse, and the technology is still basic, a boost in revenue will increase the adoption of automation, Business Insider analyst Lea Nonninger reports.

Unfortunately for job seekers, banks’ investment into automation is well under way. In fact, a detailed 2020 report from Business Insider Intelligence noted that banks are already using AI to mimic bank employees, automate processes, and preempt problems. JPMorgan is cleaning thousands of databases to make room for machine learning tech. Citi president Jamie Forese said in 2020 that robots could replace as many as 10,000 human jobs within five years.

Laura Barrowman, chief technology officer at the Swiss investment bank Credit Suisse, revealed the company is already retraining employees whose jobs have been displaced by AI: “Globally, if you look at cyber skills, I think there is a deficit,” Barrowman told Business Insider’s panel at the World Economic Forum earlier this year. “There is such a shortage of skills, and you need people who have that capability.”

Are robots taking over the world’s finance jobs?

Authors

Professor of Finance, Sunway University

Professor of Computer Science and Provost/CEO/PVC, University of Nottingham

Disclosure statement

The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

Partners

University of Nottingham provides funding as a founding partner of The Conversation UK.

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The year is 2030. You’re in a business school lecture hall, where just a handful of students are attending a finance class.

The dismal turnout has nothing to with professorial style, school ranking or subject matter. Students simply aren’t enrolled, because there are no jobs out there for finance majors.

Today, finance, accounting, management and economics are among universities’ most popular subjects worldwide, particularly at graduate level, due to high employability. But that’s changing.

According to consulting firm Opimas, in years to come it will become harder and harder for universities to sell their business-related degrees. Research shows that 230,000 jobs in the sector could disappear by 2025, filled by “artificial intelligence agents”.

Are robo-advisers the future of finance?

A new generation of AI

Many market analysts believe so.

Investments in automated portfolios rose 210% between 2020 and 2020, according to the research firm Aite Group.

Robots have already taken over Wall Street, as hundreds of financial analysts are being replaced with software or robo-advisors.

In the US, claims a 2020 paper by two Oxford academics, 47% percent of jobs are at “high risk” of being automated within the next 20 years – 54% of lost jobs will be in finance.

This is not just an American phenomenon. Indian banks, too, have reported a 7% decline in head count for two quarters in a row due to the introduction of robots in the workplace.

Perhaps this is unsurprising. After all, the banking and finance industry is principally built on processing information, and some of its key operations, like passbook updating or cash deposit, are already highly digitised.

A man leaves an Axis Bank automated teller machine (ATM) in New Delhi, India. Adnan Abidi/Reuters

Now, banks and financial institutions are rapidly adopting a new generation of Artificial Intelligence-enabled technology (AI) to automate financial tasks usually carried out by humans, like operations, wealth management, algorithmic trading and risk management.

For instance, JP Morgan’s Contract Intelligence, or COIN, program, which runs on a machine learning system, helped the bank shorten the time it takes to review loan documents and decrease the number of loan-servicing mistakes.

Such is the growing dominance of AI in the banking sector that, Accenture predicts, within the next three years it will become the primary way banks interact with their customers. AI would enable more simple user interfaces, their 2020 report notes, which would help banks create a more human-like customer experience.

Customers at Royal Bank of Scotland and NatWest, for instance, may soon be interacting with customers with the help of a virtual chatbot named Luvo.

Luvo, which was designed using IBM Watson technology, can understand and learn from human interactions, ultimately making the flesh-and-blood workforce redundant.

Meanwhile, HDFC, one of India’s largest private-sector banks, has launched Eva. India’s first AI-based banking chatbot can assimilate knowledge from thousands of sources and provide answers in simple language in less than 0.4 seconds. At HFDC Eva joins Ira, the bank’s first humanoid branch assistant.

A ‘NAO’ humanoid robot, manufactured by SoftBank Group Corp., is displayed at the Viva Technology conference in Paris, France, June 15, 2020. REUTERS/Benoit Tessier. Benoit Tessier/Reuters

AI has also made inroads in the investment industry, where, many financial analysts say, a sophisticated trading machine capable of learning and thinking will eventually make today’s most advanced and complex investment algorithms look primitive.

Advisory bots are allowing companies to evaluate deals, investments, and strategy in a fraction of the time it takes today’s quantitative analysts to do so using traditional statistical tools.

Former Barclays head Antony Jenkins, who called the disruptive automation of banking sector an “Uber moment”, predicts that technology will make fully half of all bank branches and financial-services employees across the globe redundant within ten years.

The fintech grads of the future

Universities are now revising their educational blueprint to adapt to this technological disruption in the finance job market.

Both Standford University and Georgetown University business schools are planning to offer so-called “fintech” in their MBA programmes, hoping to teach students how to become masters of financial technology.

And the Wales-based Wrexham Glyndwr University has announced the launch of the UK’s first undergraduate degree in fintech.

But fintech is so new and diverse that academics are having difficulty to construct a syllabus for Financial Technology 101, let alone more advanced topics on AI. The lack of academic textbooks and expert professors are additional challenges.

Robots gone wild

Still, it is not clear that AI and automation will actually prove advantageous for banks.

Too much reliance on AI could backfire if financial institutions lose the human touch most customers favour.

There are other risks, too. Robo-advisers are cheap and save time when creating a simple investment portfolio, but they may struggle to take the correct precautionary measures when markets become volatile, especially when thousands, maybe millions, of machines are all trying to do the same thing while operating at great speed.

In August 2020, robo stock traders at Knight Capital Group went on a spending spree and lost $440 million in just 45 minutes.

Are traders soon to be replaced by robo-traders? Brendan McDermid/Reuters

High expectations for the performance of these well-programmed robo-traders could also cause chaos in the key trading centres around the world.

There is no single algorithm that can combine multiple volatile variables with a multidimensional economic forecasting model that works for all investors. Expecting that could prove a potentially fatal error for financial markets.

And how will investors be protected when robots make the wrong decision? According to the rulings of the US Securities and Exchange Commission (SEC), robo-advisers require registration in the same way human investment advisers do. They are also subject to the rules of the Investment Advisers Act.

But it is difficult to apply to robots the financial regulations designed to govern human behaviour.

The SEC’s rules, created to protect the investors, require that advisers adhere to a fiduciary standard by which they unconditionally put the client’s best interests ahead of their own. Concerned US regulators have asked whether it is practical for robots to follow rules when their decisions and recommendations are generated not by ratiocination but by algorithms.

This conundrum demonstrates one fact clearly: it is hard to completely replace humans. There will always be demand for a real live person to act as check when and if our robots go rogue.

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