The new ideal profile for getting a job at Goldman Sachs
Few banks are embracing automation of the investment banking division quite so readily as Goldman Sachs. With Marty Chavez, its former chief information officer, freshly installed as CFO, the whole idea that advisory functions can be sheltered from the onslaught of technology that has decimated trading floors is the stuff of fantasy.
Chavez said earlier this year that there were investment banking tasks that were "begging to be automated", creating beads of sweat on the necks of analysts and associates across Wall Street, who spend hours doing monotonous Excel grunt work.
But Richard Rivero, global head of the group of engineers at Goldman Sachs - the team that creates these systems to support its investment bankers - says technology is simply helping the industry evolve. "Nowadays, we think the 'secret sauce' in investment banking is one part data scientist, or strat, one part application developer and one part banker," he said in an interview on Goldman's own blog. In other words, the world has moved on - everyone uses apps, everyone's online, so investment bankers need to embrace this.
And what about those analysts and associates? A new exciting world awaits. "And instead of working all day on pitch books, our junior bankers can get out on the road, meet with companies and spend more time being students of the markets," he said.
Goldman Sachs has also doubled the size of its strats team automating investment banking work to 75 people. Those strats are busy creating technology to help make its investment bankers more productive. They could also mean Goldman requires fewer actual bankers in future.
Specifically, Rivero says that Goldman has created apps that bankers can take into client meetings to solve complex problems on the spot.
"We've also created applications that bankers use in client meetings while also making those apps available on clients' desktops through the firm's Marquee platform," he says. "One such application, called Zephyr, allows bankers to create and run customized analyses across a variety of debt capital structures for clients in real time. The tool not only eliminates manual processes, but it also allows bankers to ask and answer questions that were previously prohibitively time consuming or difficult to address."
Apps also eliminate work previously carried out by juniors, he said. "Some of the apps that we've developed use machine learning algorithms in a way that personifies M&A transactions as an engineering problem. For example, we're building apps that help clients better understand how their shareholders relate to each other by applying machine leaning analytics to SEC mutual fund filings. In other cases, we're analyzing the factors that make a company vulnerable to shareholder activists. In addition to using machine learning to highlight new analyses, data visualization and statistical inferences, we're deploying these tools in a way that requires little to no junior banking involvement."
If all of this sounds like bad news for headcount, Rivero insists its not about about eliminating jobs.
"The growing use of technology in investment banking isn't about cost cutting," said Rivero. "It's about growth, better client coverage, deeper insights and empowering our people to become better investment bankers. Face-to-face relationships still matter but going forward we can enrich our relationships through technology."
"We're exploring ways to embed our advisory work into platforms that we can use and share with our clients. Everything -- clients, bankers and advice -- needs to be connected digitally: that's the scale play. That's how we grow the franchise," he said.
Growing the 'franchise' is a key concern for Goldman currently. After lagging the pack in the first two quarters of this year, particularly within its fixed income trading division, the bank is reportedly leaning on its investment bankers - more used to fostering long-term relationships with clients that eventually bare fruit with lucrative advisory deals - to cross-sell its FX and rates hedging products.
Goldman made deeper than usual cuts to its headcount last year, so a rough first half in 2017 suggests technology could be a convenient excuse to make its investment banking division even leaner. This is not the main aim, insists Rivero.
Technology can cut costs, he says, but it also removes mundane tasks and allows bankers to do more. "Automating mundane tasks and collecting data in a programmatic way helps our bankers refine their insights and serve clients better. With digital tools our bankers can cover more clients and in more regions," he said.
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