It’s happening. Marty Chavez will be installed as Goldman Sachs’ new CFO in April, but the spectre of automation across various front office positions is already looming large.
As Goldman’s former CIO, Chavez is a long-term proponent of automation and ‘efficiencies’ and has been instrumental in building up the banks’ tech staff to 25% of total headcount. There are parts of the investment banking process that are “begging to be automated” he told an audience at Harvard in January, which was reported by MIT Technology Review.
Specifically, Goldman has mapped out 146 distinct steps go into any initial public offering of stock, and not all of them need to be carried out by humans, suggested Chavez. Other investment banking tasks that involve relationship building and salesmanship could also be done by machines, he suggests.
The model for automation on the trading floor is Goldman Sachs’ U.S. cash equities team, which had 600 traders back in 2000, but now just has two. The rest of the work is carried out by computers and a team of 200 programmers.
“Everything we do is underpinned by math and a lot of software,” he said.
Investment bankers typically bring in $700k a year, according to figures from Coalition cited in the article, while sales and trading pay averages out at $500k. Front office compensation makes up 75% of the wage bill. Programmers are a lot cheaper.
Separately, Deutsche Bank’s investment bankers are about to have another new boss. Jeff Urwin, current investment banking chief – based out of New York – is in discussions to retire, according to the WSJ, after just two years at the top of the tree.
His replacement is expected to be Markus Schenck, Deutsche’s current CFO. Schenck does have a background as an investment banker, having joined from Goldman Sachs in 2015 where he was a partner and head of investment banking services for EMEA, so it’s not like Deutsche just handed control to an accountant. However, Schenck is based out of Frankfurt, so it sends a clear message on the shift of power.
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