making some junior bankers uneasy.
A team of 75
programmers, internally referred to as "strats," has been developing
technology to make Goldman's elite dealmakers more productive. That team within
investment banking has doubled in size since 2014, when long time tech banker
George Lee was appointed chief information officer for the investment banking
division.
Programmers
are now supporting those handling equity underwriting, leveraged buyouts and
deals within the financial services and real estate sectors. They are also
analyzing client data to offer better advice on deal targets and types of
actions that might please a particular company’s investor base.
Conventional
wisdom holds that investment banking does not yield itself to automation the
way trading does, because it relies so much on personal relationships forged
over years of business lunches, rounds of golf and boardroom presentations.
Goldman
executives say technology aims to reduce the grunt-work junior bankers now
perform, so they can spend more time helping top dealmakers rake in more money.
But some who
joined Goldman in recent years expecting to advance from supporting cast to
lead roles on big deals are wondering whether technology will be their friend
or foe.
One employee
who asked not to be named told Reuters investment bank staff are looking at how
trading got automated, and wondering if the same fate awaits them.
There is
more water-cooler chatter among young employees about using their Goldman
experience to build a career outside banking, he said. Automation is not the
only concern, but it does come up, he added.
"Banking
used to be an area where the top undergrads and MBAs wanted jobs, but now so
much of those roles are automatable," said Tom Davenport, a professor of
information technology and management at Babson College.
MIT AND
WHARTON
One concern
is that technology may make some staff redundant. Another is that the strats
themselves – more likely to hold engineering PhDs from the Massachusetts
Institute of Technology than MBAs from Wharton – could get ahead of bankers on
a career path.
Worries have
been exacerbated by weak business and broader job cuts across the industry.
At Goldman,
revenue fell 9 percent last year to its lowest since 2011, and its return on
equity remains below the 10 percent investors generally expect. Investment banking
had a rough year, hurt by a near-empty calendar for initial public offerings,
and a broad slowdown in M&A activity.
The top 10
Wall Street firms have cut the number of client-facing investment bankers they
employ by 15 percent since 2010, according to research firm Coalition.
Advances in
technology could thin the ranks of low-level staff at Goldman as much as 10
percent in the next few years, people familiar with the matter said. Kognetics,
a software company that uses artificial intelligence to assist investment
bankers, says about a quarter of their routine can be automated.
Goldman's
strats recently launched "Sellside," an application that allows
junior bankers to quickly compile deal information, such as when bids from
different buyers arrive. They have also made it possible for senior bankers to
check deals remotely while traveling, instead of calling analysts for updates.
As certain
tasks get automated, it could become harder for junior bankers to learn the
basics of their job and advance to more senior positions, said Jeanne
Branthover, managing partner at executive search firm DHR International.
"The
pipeline of talent will dwindle," she said.
But Goldman
executives involved in the technology push say their goal is to makes junior
staff more efficient and call concerns about job losses overblown. Expanding
strats' roles is necessary to stay competitive, they say.
Goldman's
deputy finance chief, Marty Chavez, has been telling people worried about their
jobs to learn skills that cannot be replicated by a computer. At a Harvard
event last month, Chavez said some investment banking tasks were "begging
to be automated," according to an MIT Technology Review report.
Chavez, a
computer scientist who made his name leading teams of strats, is now considered
a contender to eventually succeed Chief Executive Lloyd Blankfein.
Blankfein
himself likes to say Goldman is more of a technology firm than a financial one,
even though dealmakers and traders have led the bank for its entire 148-year
history.
Executives
also note that programmers have been helping investment banking for over a
decade, the cooperation has just intensified lately. They also point out that
Goldman has thousands of investment bankers around the globe, compared with
just 75 programmers inside the division.
"No CEO
is going to just use a computer to decide what company they're going to merge
with," said one. "The nature of an M&A transaction is much more
intimate than that."
*REUTERS*
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