Robots and How You'll Lose Your Job

Hello monkeys, stumbled upon a very interesting article: Are robots coming to take investor jobs on Wall Street?

Bots are squeezing their flesh-and-blood competition and threatening the jobs of thousands of human brokers in the $20 trillion US wealth management business.

Nearly one in three investors says these machines are superior at picking stocks and lessen their risk, and almost as many say the machines are better at selecting investments for retirement than human brokers

Keeping these in mind, what is the future for bankers? To be honest, it's looking quite bleak as robots and AI get smarter, and smarter, and smarter. It's not only the people working in manufacturing that are losing jobs... Bankers might be unemployed later on too.

Then again, this might be a good sign for young, inexperienced investors, since they'd have access to these robots too in the future, with less commission and cost, and also, with a good track record.

But as we all know, the stock market is a zero-sum game. Too many inexperienced investors simply joining to get profits.... Would this break the stock market?

Comments (29)

 
Best Response
Feb 8, 2017 - 8:25pm

True brokers and financial advisers are absolutely a thing of the past. Note, UHNW wealth managers are not, regardless of the technology, the estate and tax planning is so specialized and complex that there will always be a need. There are already platforms to replace the broker business so while you may not see them losing jobs for quite some time, I don't see any growth here. For FAs, and I'm talking about the middle-America adviser who manages a client with $100k annual income and $250k investable assets, they will become obsolete. Platforms and bots will be designed to do their jobs for them in a simpler, quicker, and more cost effective fashion.

Trading obviously has already seen the impacts (i.e. diminished open out cry), but I think still a ways away from making a dent in human traders.

What I do think happens is that traders will adapt or perish. The lines between quants, market data, and trading will be blended. You will have to know and understand programming languages and how to build the models that the so called bot will trade, otherwise, risk will not be effectively managed.

 
Feb 14, 2017 - 12:09pm

Good points. I don't know about entirely obsolete, but I think we'll increasingly see bot/human hybrid Advisors working with the sub 1-million segment to counter fee compression. There will still continue to be considerable fee compression, and this business has always been tough, but at the end of the day, the human element is still very much essential and many clients don't use robos for that reason.

From the opposite end, Betterment is a full on low-cost robo and they've had to raise their fees. And ask Fink from BlackRock how his quants did last year (abysmal to say the least). Robos still have a ways to go.

The last element that I see seldom addressed in this argument is the fact that few "brokers" (even that term is becoming antiquated) simply just broker investments these days. In order to win business, many advisors/brokers are beginning to position themselves and personal financial concierges of sorts--it's not just solely investments anymore. Things like regular budgeting, estate planning, collaboration/referrals to attorneys and CPA's, in depth explanation of strategies and investments (see structured investments), client events, and knowing how to tailor your words when a client wants to sell off at a low are things a robo can't quite do yet (this is a big one, watch how many amateur investors blow themselves up next correction because the robot didn't tell them to sit tight and explain why) and I don't see doing on par with a human for some time.

 
Feb 13, 2017 - 4:13pm

I am at a career crossroads partly down to this. My background is in FX Spot Trading at BB. I am nearly 5 years in but automation likely means I won't be doing it for much longer. There is less need for traders, less jobs, less pay. I have started doing NDFs which gives me bit more time but its all heading the same way. Banks want programmers now. Its not just banks, why won't Asset Management generally head the same way?
To be honest, I am considering other options while I am young. Like a masters in finance or an MBA to head in a different direction!
Other issues is I am not in love with London, for personal reasons im looking to move back home (Manchester) for which I certainly need a different skillset. I am thinking of heading down the financial analyst route. So many jobs essentially tie you to London though...

 
Feb 13, 2017 - 4:35pm

Pick something semi liquid and focus on that. Our systematic trader for example thinks you can still get edge in these markets with good fundamental analysis (his example was power). You're obviously f smart.

No London might limit opportunities but no eradicate them completely assuming you still want to trade.

 
Feb 13, 2017 - 9:58pm

Damn, you have it rough. Does this mean there wouldn't be spots for Sales&Trading later on, as technology gets better?

Good luck with your pursuits. Robots and AI certainly make it rough on bankers...

Array
 
Feb 14, 2017 - 4:56pm

I have heard and believe trading floor headcount will be probably a third of what they already have become now. Sales will get destroyed even more than trading. Machines dont need salespeople. I'm thinking of an MBA to learn more about project management, consulting, you name it

 
Feb 13, 2017 - 5:13pm

shameless plug: http://www.wallstreetoasis.com/forums/ask-a-bro-thebrofessors-ama-2016-…

also addressed here: http://www.wallstreetoasis.com/forums/how-can-am-survive-the-move-to-pa…

I'm in PWM and have thought about this a lot. the industry will shrink and comp will come down, but I still think it'll be a great career forever. these robos will really be tested when we see a >20% S&P decline,

 
Feb 14, 2017 - 11:20am

it's not weird, but I believe it's misguided slightly. stifling innovation from a purely economic perspective is an inefficient allocation of resources assuming the robots are cheaper than humans (they almost always are long term). the issue is in what you're trying to solve. if a robot is trying to solve an algorithmic problem, like say a car wash, that's easily done. you do bug prep, soap, spray, wax, spray, dry, or whatever the order is. a human would do the same order, but likely not as efficiently, so therefore robots should take those jobs.

where I see a potential disconnect is people trying to force robotics/AI onto everything (akin to the hammer approaching every problem as if it's a nail). financial markets have their roots in economics, accounting, math, and so on, but they are driven largely by emotion, something that doesn't necessarily fit well into a robot's programming. I'm not claiming to be the best expert on the planet, but I know that whenever there's a human element or an emotional/behavioral element, I think you need humans. as I've said before, many FAs were slackers, used their firms asset allocation models, charged 1-2%, then put people in mutual funds or ETFs. wealthfront/betterment uses those same models, takes the human out of it (realizing that the only benefit those slackers brought was in asset allocation advice), and lowers the cost with ETFs and lower management fees. this alone will cause the business to shrink dramatically. again, I think people don't need advice if they have the stomach for financial markets, if they don't have a lot of money, and so on. robots will take those assets. however, when the bear growls, it will be a good time to be a human. I spoke on this in other threads more, won't rehash here.

however, robots/AI presents a conundrum, because robotic innovation happens quicker than human education. say every McDonald's would only be staffed with 2-3 people at a time, because you have robots taking orders, robots cooking the food, and robots packaging and delivering some food. you only have people there to monitor the machines, clean the place, and step in if there needs to be a custom order. is that the best thing for society? I'm not just thinking about the 40 year old still working at McD's, I'm also thinking about the high school student who needs a part time job to pay for certain things because his parents aren't well-to-do, or the college kid working this as a 2nd or 3rd job to help pay for tuition. yes, getting rid of humans would add a few cents EPS to the bottom line, but is it worth it? economics says yes, my gut isn't so sure.

the libertarian in me says "well look, these people had their jobs taken because technology kept advancing, shame on them for not keeping up." it's not that simple. let's say you're a union worker manufacturing something like cable or cam heads. that's probably a high skill low education job, right? probably commanding a decent salary, no? well let's say that Acme Robotics now has a machine that will eliminate 50% of the workers there, and it will be coming online in waves, with it being completely done in 18 months. you have a family to feed, a mortgage to pay, and you already work 40-50 hours a week, and you're probably living paycheck to paycheck. do you really have the financial means, or even the time, to train yourself in something like network security, Python, and the like? even if you did have the time and the resources, do you have the requisite education to even be able to get hired after the fact?

what I fear is innovation is stifled in the name of preserving jobs, increasing costs for everyone (inflation), but what I fear with robots is we get a long drawn out period of cyclical unemployment, straining the gov't purse strings and making its way down to people who still have jobs in the form of higher taxes. my gut says our society will work all of this out, we made it through the industrial revolution which spawned a lot of things, definitely rampant unemployment, but also prosperity, and arguably the rise of communism. however, it will be painful for many on the way to prosperity, and if we're not careful, we could have a welfare state on our hands before the baby boomers die off.

 
Feb 14, 2017 - 2:45pm

yep... And they have all been built in a low inflation, falling rates, QE environment as I discussed on a thread about the risks last week. The only answers I have gotten are they'll be able to learn their way out of them (despite the fact that they will have little--if any--historical basis to train on) and we'll just turn them off

Overwhelming grasp of the obvious.
 
Feb 14, 2017 - 9:51am

Self-driving rusty Hondas, ya mean.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."
 
Feb 14, 2017 - 10:06am

Bankers will be fine. AI robos can't do the job of serving water to a table with 20 kids sitting there, and it won't be able to handle the silly egos of business owners that think they'll take over the world in 5 years. It's scary to everyone, because people are realizing they are not, nor can be as smart as they think they are. It's called the FOG folks lol

 
Feb 14, 2017 - 10:32am

Rumple4skin:

I don't understand this line of reasoning. What makes you so sure that in the next 10-20 years AI programs won't be able to build and maintain relationships the same way an MD does?

There's a human element to relationships.

That said, I think the human element for C-level execs, at least those running on the Taylorist model, isn't really there as much. I suspect many of the CEOs, at least the ones focused on costs and efficiency, will get replaced by machines.

 
Feb 14, 2017 - 10:37am

I don't know for sure because I'm not at MIT or an MD. Everyone is different. Just because someone is from Texas doesn't mean they like guns. If you ask, they might get offended. If you don't ask, you'll never know for sure. There's no pattern in building relationships, no matter how much data you have. That's why I also mentioned pouring water at a table. I don't think the AI robo will be able to perform well in a live setting, unless the table is built with some technology to make it automatic (such as a button where you can set your glass until it's filled by a robot). Even then, children have a habit of making that task even harder because they just don't sit still.

And humans don't want the most on-paper optimal deal, because that will always be wrong. The economic future had never been predictable, and human beings always believe that they have something special to affect change on history's trajectory. Relationships take time and real interaction to build so I don't see robots having the ability to do that right now.

 
Feb 14, 2017 - 8:23pm

human relationships absolutely can be modeled and optimized. This isn't a new concept...it is the basis of how boiler room brokerage shops develop "scripts" to sell product to clients (although they use qualitative brute force as opposed to "big data"). Ask anyone who has done one of these jobs and they will tell you that something like 95% of people will respond with the same 4-5 answers for any given question and therefore it is pretty easy to develop a tree of responses that makes most conversations completely pre-scripted but still flowing "naturally".

That said, I don't see sales as being a field that will naturally be displaced by automation. Right now salesforces are being cut not because machines do the sales jobs but rather because margins are so tight (in part due to automation in trading) and balance sheet is so precious (due to regulation) that many clients just aren't worth covering anymore. These days many smaller funds cant even get a salesperson to pick up the phone because its just not worth it for the bank even though the client would love to interact with a voice broker.

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