One concern is that technology may make some staff redundant. Another is that the strats themselves – more likely to hold engineering PhDs from the Massachusetts Institute of Technology than MBAs from Wharton – could get ahead of bankers on a career path.
Worries have been exacerbated by weak business and broader job cuts across the industry.
At Goldman, revenue fell 9 percent last year to its lowest since 2011, and its return on equity remains below the 10 percent investors generally expect. Investment banking had a rough year, hurt by a near-empty calendar for initial public offerings, and a broad slowdown in M&A activity.
The top 10 Wall Street firms have cut the number of client-facing investment bankers they employ by 15 percent since 2010, according to research firm Coalition.
Advances in technology could thin the ranks of low-level staff at Goldman as much as 10 percent in the next few years, people familiar with the matter said. Kognetics, a software company that uses artificial intelligence to assist investment bankers, says about a quarter of their routine can be automated.
Goldman’s strats recently launched “Sellside,” an application that allows junior bankers to quickly compile deal information, such as when bids from different buyers arrive. They have also made it possible for senior bankers to check deals remotely while traveling, instead of calling analysts for updates.
As certain tasks get automated, it could become harder for junior bankers to learn the basics of their job and advance to more senior positions, said Jeanne Branthover, managing partner at executive search firm DHR International.
“The pipeline of talent will dwindle,” she said.
But Goldman executives involved in the technology push say their goal is to makes junior staff more efficient and call concerns about job losses overblown. Expanding strats’ roles is necessary to stay competitive, they say.
Goldman’s deputy finance chief, Marty Chavez, has been telling people worried about their jobs to learn skills that cannot be replicated by a computer. At a Harvard event last month, Chavez said some investment banking tasks were “begging to be automated,” according to an MIT Technology Review report.
Chavez, a computer scientist who made his name leading teams of strats, is now considered a contender to eventually succeed Chief Executive Lloyd Blankfein.
Blankfein himself likes to say Goldman is more of a technology firm than a financial one, even though dealmakers and traders have led the bank for its entire 148-year history.
Executives also note that programmers have been helping investment banking for over a decade, the cooperation has just intensified lately. They also point out that Goldman has thousands of investment bankers around the globe, compared with just 75 programmers inside the division.
“No CEO is going to just use a computer to decide what company they’re going to merge with,” said one. “The nature of an M&A transaction is much more intimate than that.”
