This article was written by Devin Gharibian-Saki, Chief Solution Officer at Redwood Software.
It’s an innovative change that has already started slipping into reality: Wall Street’s corporations are waking up to the potential of automation and robotics in their workplaces. New automation software and integrations for robotics are filtering into Wall Street and, as a result, are implying a need for change in the industry.
Rust Belt cities like Detroit, Cleveland, Pittsburgh, and Buffalo have already seen the effects of automation on their respective workforces. Manufacturing jobs that once inundated these cities saw robotics and automation exert robust negative effects on employment and wages. The American manufacturing industry does still remain superior in the global landscape, but there is much to learn from the losses that occurred for so many as technological changes washed over an entire industry. As automation and robotics inch into the financial services sphere, it’s time that Wall Street consider the successes and failures from the American Rust Belt.
From 1999 to 2007, the manufacturing industry in the Rust Belt states and cities of the United States revealed what many early and contemporary critics predicted: the mechanization of the workforce only makes life easier for the wealthy corporate executives at the top. The economy and job climate as a whole, however, suffers. Most of the Rust Belt’s manufacturing jobs were lost to robots. The automotive industry’s workforce today, for example, is made up of 39 percent industrial robots.
Similar to America’s manufacturing industry, and despite the lingering effects of the 2008 financial crisis, Wall Street has held its place as a world leader for decades—but is it ready for the changes soon to be felt from automation? Wall Street’s financial leviathans, who continue to consolidate to create more mega-deals, and their employees who expect to build their small fortunes from the long hours at their desks, are about to be completely changed. Those individuals who counted on an MBA and a Wall Street gig to make their fortune are in for a rude awakening: the repetitive processes that were once an investment banker’s bread and butter can now be done more quickly and efficiently by a piece of software.
According to PwC, 38% of U.S. jobs are at “high risk” of being automated by 2030. Just last month, Blackrock laid off more than 40% of its staff and replaced them with artificially intelligent, computerized stock-trading algorithms. The rapid rise of automation at financial firms like BlackRock highlights a new direction for the industry: towards the leanest operational costs possible. In the face of increased competition and regulatory burdens, Wall Street’s companies and corporations are looking for the best, most fiscally-responsible reaction possible.
Wall Street needs to learn from the lessons that the Rust Belt’s industries gathered after automation took their jobs and economies. This kind of acceptance is already occurring in the industry; for example, instead of neglecting avenues of success because they include technological innovations like robotics and automation software, Wall Street workers and executives should embrace them. For example, JP Morgan is already using AI to identify potential equity clients that will help them to remain competitive among their competitors.
NEXT BLOCK ASIA 2.0 Revisits Bangkok; Ends with GURUS Influencer AwardsGo to article >>
Some banks are even learning to overhaul their operations systems. Bank of America and Morgan Stanley, which together employ more than 32,000 human financial advisers, are already working to develop their own automated robo-advisers. Wall Street employees, starting from the bottom to the top of the food chain, are acting upon these changes and accepting that the U.S. financial sector has reached its peak human capabilities.
Some, if not most, of the responsibility in saving a job from automation is dependent on the decisions made by a company’s corporate team – specifically Chief Information Officers. CIOs must be sure that their employees are enabled with the skills and knowledge to compete, or at least find their niche, as automation changes the DNA of their jobs and processes.
One company, Boxed, a shopping startup, recently announced that it had automated its entire New Jersey- based fulfillment center. In order to support the more than 100 employees whose jobs had been replaced by robots, Boxed retrained all of its employees to operate the machines and offered classes for people who wanted to transition to other roles in the company like customer service or fulfillment center associates. Wall Street can learn from this story of how the blue collar worker was saved and learn to reimagine and restructure the duties of their employees.
The responsibility to keep jobs from being replaced also falls on the worker, in both white and blue collar jobs, by future-proofing their skills sets. In fact, if employees and employers do not start in on the urgent and targeted action of reevaluating their skills, more than just jobs could be at risk. This change could exacerbate the ever-growing unemployment and inequality gaps across nations. It could hurt businesses too, by shrinking their consumer base if they are not innovative enough to keep up with the tech-savvy competition.
Automation’s disruption of the human workforce is typically bemoaned by the blue collar workers who are being physically replaced by machinery. Now on Wall Street, bankers and other financial services workers are being replaced by tiny pieces of software that can more quickly and accurately perform the menial tasks that make up much of their work. However, this change isn’t necessarily a new one for the industry. Whole areas of the financial services sector have already experienced automation.
Where trading floors were once filled with crowded stock traders, there now sit computers. Wall Street workers are aware that they aren’t immune to the growing trend of automation. In fact, one could argue that the industry is even preparing its workers: financial education organizations like the CFA Institute have already started to roll out a curriculum that will include artificial intelligence, big data, and robo-advice. These updated programs are part of the greater industry effort to help workers entering the financial services spheres to remain relevant and competitive against the software and robo-advisers that are working to replace them.
Analysis and advice
Beyond AI, big data and other tech skills, a big part of finance is analysis and advice. Despite all the upcoming changes, there is comfort to be found in what will not change. The automation of manual, menial tasks will enable finance pros to do what they were trained for in college: analyze data and give strategic advice. Automation will enable them to do more analytical thinking more quickly. So, while many accountants and payments professionals should be conscious of this transformation, there is no reason why this should be feared. Just as the auto-pilot has not replaced pilots, this new wave of innovation in accounting technology is designed to assist accounting professionals, not totally replace them.
Despite the initially crippling effects of robotics and automation on America’s manufacturing workforces, the industry remains number one in the world. This is because of the sector’s willingness to evolve with technology rather than stagnate because of its refusal to accept inevitable change. Wall Street, in order for a similarly successful adoption of this innovation, must do the same. The financial services sectors in the United States need to lean into the technological advancements that are changing in order to stay afloat among them.
As the American manufacturing industry did, Wall Street can hold onto its global dominance if it accepts this new, odd-looking but imminent reality.