Wall Street Banks Seizing AI to Rewire World of Finance

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New York | Deutsche Bank is using artificial intelligence to scan wealthy client portfolios. ING is screening for potential defaulters. Morgan Stanley says its bankers are “experimenting” in a “safe and contained environment”. Meanwhile, JPMorgan is hoovering up talent, advertising for more AI roles than any of its rivals.

The AI revolution is unfolding on Wall Street as wider interest grows in the evolving technology and its likely impact on business. At the most enthusiastic banks, about 40 per cent of all open job roles are for AI-related hires such as data engineers and quants, as well as ethics and governance roles, according to new data from consultancy Evident.

Wall Street banks are using AI “to come up with more tailored hedging solutions” to offer better pricing to clients. AP

JPMorgan is leading the way. The biggest US bank advertised globally for 3651 AI-related roles from February to April, almost double its closest rivals Citigroup and Deutsche Bank, Evident’s data showed.

Eigen Technologies, which helps firms including Goldman Sachs and ING with AI, said inquiries from banks jumped five-fold in the first quarter of 2023 compared to the same period a year ago.

‘AI arms race’

 

The release of Open AI’s ChatGPT in November 2022 has “made everyone – the board, the CEO and the leadership across the banks – much more aware that this is a game-changer”, said Alexandra Mousavizadeh, Evident’s chief executive and co-founder. “The price for talent is going up,” she said, describing the situation as an “AI arms race”.

The prize is the prospect that everyday tasks will be handled more efficiently and effectively while complex analysis and risk modelling are made easier and faster.

That is particularly tempting in banking, where reams of data underpin increasingly complex investment decisions, despite uncertainties about AI’s eventual capabilities and concerns about how to regulate it.

The process has already begun, according to lawyers advising lenders on technology and regulatory issues. Banks are using AI “to come up with more tailored hedging solutions through instruments like interest rate swaps and equity derivatives, enabling them to offer better pricing to clients”, said Steven Burrows, a director at Fieldfisher and a former derivatives trader.

Deutsche Bank is deploying so-called deep learning to analyse whether international private banking clients are too heavily invested in a particular asset, and match individual customers with suitable funds, bonds or shares. Subject to regulatory compliance, human advisers then pass on AI-generated recommendations.

“I’m a big fan of combining artificial and human intelligence,” said Kirsten-Anne Bremke, global lead on data solutions at Deutsche’s international private bank.

JPMorgan has similar plans. It filed a patent application in May for a ChatGPT-like service to help investors select particular equities, according to a person familiar with the matter who is not authorised to speak publicly. The project is in its early stages.

Morgan Stanley says it is allowing businesses around the firm to run tests “from the bottom up” using open-source large language models – large AI networks trained using massive amounts of text from all over the internet.

In April, the bank said it had patented a model using AI and deep learning to interpret whether communications from the Federal Reserve were hawkish or dovish. The goal is to detect the direction of monetary policy.

“Every business, trading desk and investment group tries to understand it deeply,” Yuriy Nevmyvaka, head of the bank’s machine learning research group, said in an interview. “It’s in a safe and contained environment and it’s all within our walls.”

The push has some urging caution, with concerns over transparency and effectiveness. Many, including billionaire investor Warren Buffett, see the eagerness to embrace complex AI systems as a harbinger of future risks.

“When something can do all kinds of things, I get a little bit worried,” the chairman and chief executive of Berkshire Hathaway said at the company’s annual meeting on May 6. “Because I know we won’t be able to uninvent it.”

Lenders are no strangers to using tech to gain advantage, recruiting data scientists, machine-learning experts and even astrophysicists in recent years. Those investments are now bearing fruit.

Wells Fargo is using large language models to help determine what information clients must report to regulators and how they can improve their business processes.

“It takes away some of the repetitive grunt work and at the same time we are faster on compliance,” said Chintan Mehta, the firm’s chief information officer and head of digital technology and innovation.

French bank BNP Paribas is using chatbots to answer client questions while AI seeks to detect and prevent fraud and money laundering. Similarly, Societe Generale’s Cast uses its computational power to scan for possible misconduct in capital markets. It operates in 26 languages to process 2.5 million hours of conversation and 347 million emails each year, the bank said.

Goldman Sachs analysts estimate that 300 million full-time jobs globally could be exposed to automation by generative AI, according to a report in March. That could include 35 per cent of the business and financial operations industry in the US.

‘Now in a hype cycle’

 

Bank of America CEO Brian Moynihan said in April that AI could have “extreme benefits” and would help to reduce headcount, while urging caution. “We have to understand how the decisions are made,” he said in an earnings call.

Bankers have a fiduciary duty not to trade on unreliable information. That is an issue as use of AI expands, according to Anne Beaumont, partner at Friedman Kaplan Seiler Adelman & Robbins in New York.

“How do you demonstrate to investors and regulators that you’ve done your duty when you’ve used an output without really knowing what the inputs are?” she said.

Alan Blackwell, professor of interdisciplinary design at Cambridge University’s department of computer science and technology, said a bank would need to trawl through information from a very wide range of public sources to train large language models. “For a respectable bank are you really going to say the same thing to your customers that the LLM has found on Reddit?”

AI is also expensive, both to develop and to run. Estimates show the costs of using large language models to answer a question can be as much as $US14 ($21.50) per query, compared with $US6 via a human lawyer, according to Eigen CEO Lewis Liu. That is because of the extensive cloud computing costs associated with dealing with complex financial documents.

Memories are still fresh of how blockchain and cryptocurrencies failed to deliver the far-reaching changes talked up by their backers.

Firms need to identify areas where AI can genuinely help and draw up a road map with senior executives, as well as training staff and hiring more experts, said Carlo Giovine, a partner at McKinsey who works with lenders and insurers.

They also need to redesign risk frameworks to deal with intellectual property considerations, an uncertain regulatory environment and the danger of so-called AI hallucinations, where the system fabricates convincing-sounding information.

“We are now in the hype cycle, you can see how quickly the industry is moving,” Mr Giovine said. “Some banks have started to realise what’s required to really scale this, but many are still trying to understand.“

Source: https://www.afr.com/technology/wall-street-banks-seizing-ai-to-rewire-world-of-finance-20230601-p5dd3o

 

Wall Street Tells New High School Graduates to Pick Tech Career Over Finance

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Jo Constantz, Bloomberg News

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    , Photographer: Dan Kitwood/Getty Images

(Bloomberg) — Parents of today’s kindergarteners should think about prodding them toward a career in the medical field.

Those are the findings of the latest MLIV Pulse survey with 678 respondents. Nearly 40% said that children currently in elementary school will be best off with a job in health care if they want to avoid being displaced by artificial intelligence. Jobs in the medical fields often involve much more human-to-human interaction, which for now seem hard to replace with generative AI programs like ChatGPT.

Demographic trends may also be supporting the idea that becoming a doctor or a nurse will be a wiser choice for the youngest generation: Economists forecast massive demand for health-care workers as the population ages in the US and around the world.

Investors have a different recommendation for those graduating from high school. Those students will be best off pursuing a career in tech, despite recent layoffs at Meta Platforms Inc., Amazon.com Inc. and Alphabet Inc. Tech savvy is seen as ever more important in a world increasingly influenced by digital platforms, even as some worry AI may pose a threat to some entry level jobs.

“The highest paying jobs were so clearly in the finance sector for two or three decades, and now tech is really competitive with that — they’re kind of neck and neck,” said Andrew Challenger, senior vice president of human-resources consulting firm Challenger, Gray & Christmas Inc. Even with the rise of AI he expects tech and finance to remain among the most lucrative careers for the next 20 or 30 years. “I don’t see that going away,” he said.

Some 52% of 556 professional investors said that technology is the way to go for high school students. Among 122 retail investors, 48% voted for tech. Read full survey results here.

Recent hiring trends support the results. While the current downturn has hit both Big Tech and Silicon Valley startups hard, recruiters in traditional industries — from automakers to the federal government — have rushed to snap up laid-off tech talent and new grads. These days, every company is a tech company, as the saying goes.

Part of the perception that the grass is greener in Silicon Valley may also stem from the way that tech has transformed the inner workings of Wall Street. “There are lots of people that have brilliant financial minds, and yet they can’t put into effect a trading strategy without relying on serious programmers to come in and actually implement it because it’s moved past human beings in some ways,” Challenger said. “I can see why they feel that threat.”

As for the potential impact of AI on Wall Street, only 12% said finance would be the best career option for today’s kindergarteners. While a previous MLIV Pulse survey found that most finance professionals were confident AI won’t replace them in the next three years, that confidence appears to falter over a longer time horizon.

A recent Goldman Sachs Group Inc. report estimated that some 300 million full-time jobs worldwide may soon be affected by AI automation.

Significant layoffs as UBS Group AG absorbs Credit Suisse Group AG, combined with earlier job-cut announcements from Citigroup Inc., Morgan Stanley and Goldman Sachs likely made the respondents lukewarm about careers in finance. The KBW Bank Index is down about 18% year-to-date compared to the S&P 500 up over 7%. The tech-heavy Nasdaq 100 is up about 20%.

First-quarter bank earnings kicked off Friday as JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. reeled in windfalls from higher interest rates that upended smaller lenders last month. But even the big lenders signaled caution, including on the hiring front. While JPMorgan hired more people, the bank plans to keep headcount flat over the rest of the year and expressed caution regarding more buybacks.

Most survey respondents said an undergraduate degree is still worthwhile, despite the considerable investment of time and money. Still, some suggested that going to trade school to become a carpenter, electrician or plumber, jobs which can’t be easily outsourced or automated, might be a path worth pursuing.

MLIV Pulse is a weekly survey of Bloomberg News readers, conducted by Bloomberg’s Markets Live team, which also runs a 24/7 MLIV Blog on the terminal. To subscribe to MLIV Pulse stories, click here.

This week, Bloomberg macro strategists Cameron Crise and Simon Flint ask in the MLIV Pulse survey where the fed funds rate will be at the end of the next easing cycle. Click here to share your views.

–With assistance from Heather Burke.
Source: https://www.bnnbloomberg.ca/wall-street-tells-new-high-school-graduates-to-pick-tech-career-over-finance-1.1908373?fbclid=IwAR0uaXXw_074K0PDz3YDEqFoG7pemqb0WMMX_CxJrzLHyEDA9LU4w9k03uc

‘How is that a real job?’ Parents struggle to keep up with children’s career options

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Survey finds many feel overwhelmed as their children express interest in jobs they know nothing about

Amelia Hill Thu 19 May 2022 07.00 BST

When Leon Martin asked for his parents’ advice on how to pursue his dream of becoming a UX designer, they were flummoxed. “I literally didn’t have the first idea what he was talking about,” said Anne, his mother. “I didn’t know whether he was talking about designing clothes, computer programmes or a fancy new brand of mountain bike.”

Even when 18-year-old Leon explained that the role was to do with “behind the scenes” online design, his mother floundered. “I felt like I’d totally failed as a parent,” she said. “My job as a parent is to open doors so my children can achieve their potential, but how can I do that when I don’t even understand what their ambitions are?”

Anne isn’t alone. Research has found that more than two-thirds of parents of 11- to 18-year-olds in England are lost in a “job fog”, feeling overwhelmed as their children express interest in careers they know nothing about.

The situation isn’t helped by the number of new career and education options available to young people. More than 75% of parents felt that giving relevant career advice to their children was almost impossible in such a fast-changing jobs market.

Michelle Rea, from Talking Futures, which carried out the survey of more than 2,000 parents of secondary school pupils in England, said parents were concerned that their lack of knowledge could hinder career conversations.

“All the evidence points to the pivotal role parents’ attitudes and opinions play in shaping and influencing their children’s education and career choices,” she said. “The temptation is to stick with what we feel most confident talking about, and that’s usually what we know and have experienced ourselves. But things have changed since most of us were at school.”

Bryony Mathew, a neuroscientist, British ambassador and author of Qubits and Quiver Trees: Awesome Careers of the Future, said the world was changing so rapidly that parents should not try to identify specific careers for their children.

“Children in primary school today will one day take on careers that don’t yet exist, and each child won’t have just one career but lots of different careers,” she said. “This means that parents should be encouraging their children to learn a wide mixture of art, science, computing and coding, so that they can find or create their own niches. Parent can’t possibly teach a child what their niche is in such a fast-moving world; it’s something the young person has to discover themselves.”

Shamajul Motin, an educational consultant for the Shaw Trust, employment consultants who work for the government and the Education Skills Funding Agency, said he spent most of his time talking to parents who did not understand their children’s career choices.

“For example, we have loads of young people who want to be streamers, and the parents are like: ‘How is that a real job when all they do is play computer games all day? How are they going to make a living out of that?’” he said. “But the parent doesn’t realise that the child actually can not only make a lot of money from doing exactly that – but go on to gain the attention of a big gaming company and then be employed by them. The world of work has changed and it’s taking parents time to realise that.”

Source: https://www.theguardian.com/money/2022/may/19/how-is-that-a-real-job-parents-struggle-to-keep-up-with-childrens-career-options

Citi’s Investment Bank Plans to Hire 2,500 Coders This Year

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By Viren Vaghela and Jennifer SuraneJanuary 6, 2020, 7:00 PM GMT+8 Updated on January 6, 2020, 11:14 PM GMT+8

Citigroup Inc. plans to recruit 2,500 programmers this year for the unit that houses its traders and investment bankers, bulking up on coders and data scientists as technology reshapes the business.

Roughly three-quarters of the company’s trade orders last year were electronic, according to Stuart Riley, global head of operations and technology for the bank’s Institutional Clients Group. The ICG arm will add programmers in locations from New York to Chennai, India.

The hires reflect “what we are building in technology and why we are focused on making salespeople and traders more effective at servicing our clients,” Riley said in an interview at Citigroup’s Canary Wharf office in London. “Technology is augmenting what humans do by making better use of data.”

Global banks are investing billions in a race to apply technologies that make front-office staff more efficient and keep clients trading. Goldman Sachs Group Inc. and JPMorgan Chase & Co. are among other firms that are hiring as computer specialists change the face of trading floors across Wall Street.

JPMorgan spends $11 billion on technology every year, while New York-based Citigroup budgets roughly $8.5 billion, or about 20% of total expenses. Bank of America Corp. has said it spends approximately $10 billion on technology, with about $3 billion of that going to new projects.

Citigroup has started reaping the benefits of those investments in recent years, saying they’ll help save as much as $600 million in 2020. The bank, which already has 23,000 technology specialists in its ICG business globally, said the new roles will be in London, New York, Shanghai, Toronto, Dublin, Tel Aviv, Pune and Chennai in India, and Tampa, Florida.

Tech giants are already waging a battle for talent in Citigroup’s hometown. Facebook Inc. said it’s planning to hire more than 3,000 people over the next three to five years in New York City, while Amazon.com Inc. announced plans to lease space in Manhattan that will house 1,500 workers.

Python Push

Citigroup has been shrinking its workforce, with the number of employees slipping to 199,000 at the end of the third quarter, an 18% drop from five years earlier. More recently, the firm has been cutting jobs in its trading unit as it attempts to meet long-sought efficiency targets.

Citigroup’s new recruits will work on projects including solutions in equities and fixed income, according to Riley. The bank has already used its tech teams to automate news, analytics, pricing and trade ideas for salespeople by drawing on their message exchanges with clients, he said.

About two years ago, the bank had 30 spaces for a Python coding class and was inundated with requests, according to Riley. It now has 1,600 front-office staff trained in the computer language.

“The delineation between traders and technologists in markets is disappearing,” he said.

Greenwich Associates said in a study published Monday that data scientists will take up more seats and accumulate more clout on trading desks this year.

“One could argue that most, if not all, of the market’s evolution over the past decade has come because of access to data and the ability to put it to work,” Kevin McPartland, head of research in Greenwich Associates’ market structure and technology group, said in the study. “So it should come as no surprise that experts in that field are taking over.”