When investment banks talk about their “army of robots”, it’s usually safe to assume that they do not have a literal army of robots and are just trying to sound like they've watched the Terminator franchise. Not only that, even the metaphorical robots are often incredibly prosaic and might be better called “slightly more efficient back office processes”. But, while not necessarily exciting in and of themselves, these robots ought to be of interest to anyone who cares about the future of work in financial services, because the one thing that financial “robots” do have in common with the science fiction kind is that they aim to replace the human race.
At Deutsche Bank, they have a particularly strong incentive to get with the robot revolution. Deutsche employs 9,000 people in operations for the investment bank, many of them engaged in quite repetitive tasks, cutting and pasting things from Word documents to Excel spreadsheets and checking the results. These systems were described by former CEO John Cryan as “too manual, which can make you error prone and it makes you inefficient”. It’s been an endemic problem on Wall Street for years and can be partly blamed on the annoying tendency of clients to send payment instructions without always being clear which legal entity they're meant for or which account the money ought to be paid into. Banks have therefore historically needed people to handle the ambiguity that the computers can’t.
Except that computers can handle a lot more ambiguity these days, thanks to the widespread availability of machine learning. Deutsche isn’t saying how many jobs it’s specifically been able to cut in its operations division, but so far the “robots” have processed five million transactions, carried out three million checks and saved an estimated 680,000 hours of human labour. (Presuming that someone in DB's back office works 45 hour weeks, 50 weeks a year, this suggests that Deutsche has got robots doing around 300 people's jobs, so it's still early days.)
This factoid comes from a Financial News interview with Mark Matthews the Deutsche head of operations for CIB and the man in charge of “Operations 4.0”, the latest back office automation drive. (The name is a reference to a German government scheme for the manufacturing sector called “Industrie 4.0”, rather than necessarily implying the existence of three previous waves). He also suggests that Deutsche is now retraining and hiring into “a role that it calls, informally, operations engineer”.
It’s not completely clear what this new job would involve and nor does Matthews elaborate, but operations engineer seems to be the Deutsche Bank role best guaranteed to outlast the rest. The ideal applicant would likely be someone with an understanding of the sort of processes that Deutsche is automating plus comprehension of 'robots' and market developments. For the moment there's little sign of any operations engineer jobs on Deutsche's website, although the bank is hiring for a role formally described as “Regional Data Centre Operations Engineer.” That person is tasked with keeping the DB servers running in London's Vauxhall, plus keeping cooling systems functional and security patches up to date. Robots here we come.
Elsewhere in the world, Google has had a reputation for Wall Street intransigeance ever since its Dutch Auction IPO. But when it comes to M&A advisory work, the Alphabet Group is about as old school as it’s possible to be – they pay a monthly $200k retainer (pretty retro) to a single lead bank (very retro) and that bank is the ultimate old-school insiders, Lazard & Co. Google doesn’t actually generate all that much fee income – roughly $70m since 2011 according to estimates, but being the lead advisory bank to the tech industry’s biggest player is some serious bragging rights.
How does Lazard do it? Partly by providing the same sort of services that a management consultancy like McKinsey does, investigating the smartwatch market in the lead-up to Google’s acquisition of Fossil. But also by providing exactly the service that most management consultancies don’t provide – the service of not going off and monetising your intellectual property by selling it to half a dozen other clients. The lead bankers for Lazard on the Google relationship are Paul Haigney and John Gnuse, and they take an “old fashioned” approach to press coverage, which is to say that they don’t want it. For a player like Google which can move tech valuations just by indicating interest in an industry, it appears that the most value-added capability in an advisory banker is the age-old and surprisingly rare skill of being able to keep one’s mouth shut.
Sergio Ermotti plans to retire at the shareholders’ meeting in 2021, according to not only “several close associates” but also to “sources familiar with the matter”, indicating a very high degree of certainty. That means the starting gun has been fired in the succession race; the departure date would mean that Mr Ermotti would have spent a decade at the top, and would give the front runners (Iqbal Khan, Tom Naratil and Sabine Keller-Buse) a decent length of time to prepare their promotion cases. (Finews)
Quants with strong stomachs – Aspect Capital had a chilli-eating contest in which no fewer than five of its employees consumed an entire Carolina Reaper pepper (Financial News)
Eating chillis is made to look somewhat tame by the alleged drinking culture at Pernod Ricard, with some employees apparently feeling under social pressure to drink as many as 12 glasses of its signature aperitif a day (Guardian)
“You can also have her impersonate you via email, although there’s always a risk of that ending in embarrassment if she is not highly responsible and trustworthy” Some slightly frightening advice to tech company founders on how to pretend to have an investment banker when you don’t. (Techcrunch)
For heaven’s sake, when the FBI calls you up to warn that your latest financial sponsors transaction looks like a fraud, take the call. (FT)
And the Pope’s anti-money-laundering specialist has left his job after a turf war with the Vatican Bank over a real estate development in Chelsea, a story which feels like it ought to be subject of a bidding war between Hollywood studios. (Finews)
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