Wall Street banks are stepping up efforts to automate the “rough work” imposed on young investment bankers, describing the changes as an attempt to reduce workloads and prevent young talent from leaving the industry.
Companies such as Goldman Sachs, Barclays and Moelis have initiatives underway to automate basic functions such as presentation book generation and valuation modeling, according to bank executives.
The efforts suggest that attempts by Wall Street banks to appease junior bankers by increasing their salaries have been insufficient to stem the high rate of attrition within their ranks.
“The goal is to empower young bankers to do more and more meaningful things and fewer subordinates,” said Dan Dees, co-head of investment banking at Goldman.
So-called grunt work can include scanning news stories to prepare the Public Information (PIB) book on a potential client, cleaning up data sources for corporate financial metrics, and shaping reports. PowerPoint presentations.
Goldman has nearly 100 automation and efficiency projects underway at its investment bank. He also developed tools that automatically update charts in presentations with the latest data so bankers don’t have to manually edit them.
Barclays has formed a task force that includes its investment banking co-heads to look for ways to automate some of the tasks performed by junior bankers.
“We are investing to automate elements of the junior banker’s role in an effort to improve efficiency and enhance their work experience,” said John Miller, co-head of investment banking at Barclays.
Moelis said the bank is looking at how to improve its process of generating introductory books, which are presented to potential customers.
This automation could also help companies reduce the number of bankers they will need to hire in the future, especially if they have to pay higher wages.
“The workforce in the banking industry is likely to decline, thanks to technology. The mantra has been, remains and will be more and more: do more with less, ”said Mike Mayo, banking analyst at Wells Fargo.
The investment banking workflow is at the mercy of transaction activity, so during busy years, like 2020 and 2021, companies often find themselves understaffed.
Typical stress became particularly acute during the pandemic, with staff facing record levels of trading activity while working remotely. A group of first-year Goldman employees spoke earlier this year about the effect of exhausting hours on their mental health.
“The speed has changed forever since the pandemic,” said David Erickson, professor of finance at the Wharton School at the University of Pennsylvania who previously worked in investment banking for 25 years. “Instead of eight to ten [presentations] per week for the team, it is now eight to ten presentations per day.
Even before the pandemic, investment banking had lost some of its luster for graduates, said Erickson, who has seen fewer students choose to enter the industry, choosing private equity careers instead. , technology and consulting.
In the most spectacular move in the fight for talent, Wall Street banks have raised the salaries of junior bankers, with the rough benchmark for first-year pay rising from $ 80,000 to $ 100,000. It does not include bonuses.
Banks say the automation efforts are recognition that more money is not enough to ensure the industry can still attract the best talent.
“It’s not about people working less. It’s about people working on things they enjoy, ”said Huw Richards, global head of digital investment banking at JPMorgan Chase, an initiative the bank created in 2018.
Investment banking lags behind other areas of banking, such as sales and commerce, in its adoption of technology, with many other functions unchanged from previous decades.
“Preparing and aggregating data is 60 to 65% of the work of young bankers. And it’s ripe for automation, ”said Roy Choudhury, managing director of the Boston Consulting Group.
One obstacle is that senior bankers sometimes do not encourage junior bankers to use tools that are already available. Part of the reason, bankers say, is investment banking’s much-vaunted learning approach, with grueling hours on small tasks seen as a rite of passage. For others, “taking the leap to trust this data is a big step,” said Peter Pollini, head of banking and capital markets at PwC.
Cutting the mundane, however, is still only part of the battle. David Stowell, a finance professor at Northwestern University’s Kellogg School of Management, said mentoring senior bankers is the thing most likely to ensure juniors feel their work is worth it.
“Some bankers just won’t spend time with juniors,” said Stowell, who previously worked in the investment bank. “And some only spend time with junior bankers when they’ve made a mistake. Then, these young people have the impression of having been treated like machines.