Benefit or Threat? How Artificial Intelligence and Robotics are Changing the Finance Industry and Your Jobs.

Madelyn Bowen, Shelbi Bias, Juan Berru, Severo Bernal, Gabriela Arguello, Jacobo Attias and Robert Autenreith

 

It is no mystery that Corporate Finance is starting to use Robotic Process Automation (RPA).  These robots aid in the gathering of information such as statistics and data in corporate finance. As of now the nations leading the way with the use of robots are South Korea, Singapore, China, and Germany, followed by Japan, Sweden, and Denmark with the United States ranking 7th (According to USNews). As of now, these robots cost 30,000 US dollars and an additional 15,000 to maintain along with the software. These costs are projected to be reduced when more robots are introduced to the finance industry but for now stem pretty high.

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Using asset management robots saves companies the cost of labor as well as reduces processing time by 50%. Asset management robots also cut production costs by 80%. Robotics have also facilitated information gathering in Finance.  Humans account for 80% of the information gathering process while IT accounts for 20%. The introduction of RPA’s has facilitated information gathering for it has not been as dependent on humans, helping them focus on the evaluation of information as opposed to researching. Humans have taken well to the introduction of robots, for now.

The introduction of automated, algorithmic, and quantitative trading to asset management has completely changed the finance industry. Goldman Sachs Main Office used to have over six hundred traders helping some of their largest clients. Out of those six hundred traders, only two remain. All of those traders have been replaced by complex trading algorithms with Artificial Intelligence (AI) capabilities. This replacement of traders is commonplace throughout much of Wall Street and within other big investment banks.

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The introduction of automatic improvement to AI in finance industry has hurt the employment of many Wall Street traders. Although many lower level people in the financial industry have been hurt by this technology, the asset managers and executives have greatly benefited. The results of AI trading has allowed for asset managers to cut wage expenses to all of the traders who have previously been working there. In the example of Goldman Sachs, that is six hundred less salaries they have to pay to employees each year. Overall that is a lot of money saved on employees who have been replaced by AI bots.

Robots have been taking jobs and doing tasks in business at financial institutions on Wall Street – displacing financial analysts and other finance-related jobs. Some jobs robots are doing in the finance industry include: “operations, wealth management, algorithmic trading and risk management.” They have been performing these tasks in less time than a human worker ever could.

Blue-collar workers are slightly more likely to lose their jobs than white collar workers due to advances in Artificial Intelligence. The finance industry consists of white-collar workers. According to Northeastern University’s national survey, 51% of white-collar workers are “confident or extremely confident they could acquire the education or training they need if they were to lose their jobs.”

Since technology is able to analyze data and do the mathematical side of finance, “soft” skills, such as communication, creativity, and critical thinking, are the most important for workers to possess in order to avoid losing their jobs to AI. To better prepare students to deal with robots in the workforce, colleges should offer more classes on how to use the new technologies as they become available. This way graduates will be able to go into the workforce knowing how to use robots. Colleges should also have more classes on how to create and use online businesses as a way to market business since more customers are using websites instead of meeting in-person.

Artificial Intelligence AdvantagesArtificial Intelligence Advantages And Disadvantages
Long-term ramifications are that asset management will become increasingly risky due to the implications of AI and robots. Because of this, human workers will still be needed in order to counter some of the risk. Despite the displacement of jobs, there is still a demand for financial services, especially online companies. Consumers still need the goods the finance industry offers, so as robots increase production and compute information faster, people will continue buying the companies’ products and services.

People are shifting their business to online finance companies because of the availability, speed, and precision. With online financial products and services at the touch of one’s fingertips, people are preferring the newer, online companies over ones that require in-person meetings. Online services mean customers can receive financial help at the time that works best for them and they don’t have to worry about scheduling problems. Robotics programs can compute data and offer the products and services more efficiently than humans can. Immediate help makes the process easier and faster for customers.

AI has completely re-shaped the asset management and financial industries in just the past few years. What used to be an entirely human driven market has now mostly been replaced by emotionless robots. It is being debated today whether certain stock market moves and trends (within the past few years) have been entirely caused by AI-driven trading. The pursuit of higher returns and new strategies for asset managers seems to have turned many to AI.

Hedge fund managers and investment banks who made this move to AI have potentially saved millions on paying six figure salaries. The option to only have to pay a few AI software engineers to write code for their trading bots is a very attractive business move. Aside from saving money on employment, the percent returns and success of AI trading bots could outpace regular human based trading strategies. Many of the human errors with trading strategies could be eliminated altogether with the use of AI.

Artificial Intelligence AdvantagesArtificial Intelligence Advantages And Disadvantages

The AI affects not only the assets managers but the customers themselves. Clients who decide to invest with these firms have the possibility to have a significant return on their capital. It is not just the financial industry workers who are bringing about this change, but it is the investors themselves. The question remains, is the threat of AI taking over asset management overdone, or will human touch be taken out in a matter of years? The many firms who have not embraced AI have the risk of getting left far behind as this technology continues to advance at an ever increasing rate.

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