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How a world class wealth management CEO thinks about automation

 

How a world class wealth management CEO thinks about automation

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I came across this really good interview of Morgan Stanley CEO James Gorman at Bloomberg Markets. Eric Schatzker gets into some questions about the threat to human jobs from automation. I thought this was a really good answer.

ES: How dramatically will artificial intelligence, machine learning, and automation reshape this industry?

JG: How will it reshape the M&A advantage our bankers lend to global cross-border transactions? I would say relatively little. How will it shape the potential for more electronic trading aided by various algorithms in our fixed-income businesses? I think quite a lot.

If you looked at the trading floor 15 years ago, there was very little electronic trading. Now our equities business is almost entirely electronic. If you looked at the role of the so-called strats—the technology strategists and the people that write the programs to enable better client trading, better activity—they’re ever-present on the trading floor. They didn’t exist a few years ago. If you look at the branch offices in wealth management, the old cashier rooms, they used to manually match trades at the end of the day. They had vacuum tubes.

and…

ES: Why won’t computers just over time pick off one bit or another of what humans have historically done?

JG: Doing analysis, compiling spreadsheets, looking at industry trends, machines will do that better than humans, because they’ll do it perfectly and faster. To the extent you’re using intuition—How will this person respond if there are three of us in the meeting or one of us in the meeting? Should I do this on a Friday afternoon or a Monday? Should I do this over dinner or over breakfast? Should I present my best case at the outset or my worst case at the outset?—I think that’s very, very hard to replace.

You could have a machine tell a client who’s panicking in a market down cycle, “Do not sell,” and show them a thousand risk-return models mapped out beautifully on the screen. And then that person gets a phone call from a friend saying, “Hey, I just sold my stock. What are you doing?” And they immediately jump on the phone and sell. But when an adviser says, “No, you really shouldn’t sell. You can look at the models, but I’m telling you from experience,” that has value. That’s not going away.

Josh here – I think this is mostly right. Computers don’t empathize and people turn to software for simple queries, questions that have black and white answers. “What is the capital of Sweden?” has only one answer, and it doesn’t matter from which search engine one obtains it.

“Am I going to be okay?” may have a mathematical answer, but the answer is besides the point. The question is only being asked so as to instigate the conversation.

It’s Stockholm, by the way.

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