Wall Street brokers fear that artificial intelligence will soon replace them. What is the reason for this fear? Let’s find out.

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AI Tools Are Poised to Transform Investment Banking Jobs, Raising Critical Questions About the Future of Finance

The End of Tedious Tasks in Investment Banking

Late nights spent creating PowerPoint slides, entering data into Excel, and polishing complex financial documents may soon be relics of the past in investment banking. This traditionally elite industry, known for its prestige and high salaries, has long required new analysts to endure these laborious tasks. However, the landscape is rapidly changing with the advent of generative artificial intelligence (AI).

AI Revolution on Wall Street

Generative AI, capable of creating and analyzing new data, is now making significant inroads on Wall Street. Historically resistant to change, investment banks are beginning to embrace AI technology, which has the potential to replace entire tiers of employees, particularly those at the entry-level.

Impact on Entry-Level Analysts

The most immediate threat is to entry-level analysts who typically spend countless hours learning the intricacies of corporate finance, such as mergers, public offerings, and bond deals. AI can now perform much of this work quickly and without complaint. Julia Dhar, head of BCG’s Behavioral Science Lab, notes that the structure of these jobs has remained unchanged for at least a decade. The key question is whether fewer analysts will be needed.

Exploring AI Tools

Major Wall Street banks, including Goldman Sachs and Morgan Stanley, are testing AI tools that can complete tasks in seconds that previously took hours or entire weekends. These tools, known internally by code names like “Socrates,” could significantly reduce the need for new college graduates. Some insiders suggest banks might reduce their junior analyst hires by up to two-thirds and lower their salaries, as the roles will be less demanding.

Human Oversight Still Needed

Despite the push towards automation, human oversight will still be necessary. Christoph Rabenseifner, Deutsche Bank’s chief strategy officer for technology, data, and innovation, acknowledges that while AI can replace some junior staff, human involvement remains crucial.

Anticipated Changes and Continued Experimentation

Although it is still too early to specify job changes, Accenture estimates that AI could replace or supplement nearly three-quarters of the working hours of bank employees across the industry. Goldman Sachs is actively experimenting with AI, though no immediate changes to incoming analyst classes are expected.

AI’s Broader Impact

AI’s impact on investment banking is just one example of how the technology is reshaping various industries. For instance, Deutsche Bank is using proprietary AI tools to analyze vast amounts of financial data and generate summaries of potential financial strategies. Similarly, BNY Mellon’s CEO mentioned that AI allows research analysts to start their day later, as it can process overnight data and draft reports.

Integration Across All Areas

Morgan Stanley’s head of technology, Michael Pizzi, plans to integrate AI into all aspects of the bank’s operations, including wealth management. Many AI tools are still in the testing phase and will require regulatory approval before widespread implementation. However, Bank of America’s CEO noted that AI is already enabling the firm to hire fewer staff.

Future Developments

Goldman Sachs is developing a tool that can convert a lengthy PowerPoint presentation into an “S-1” document, necessary for initial public offerings, in less than a second.

For more details, read the original article from The New York Times.

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