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Paging @2rafa or anyone else who can explain to me what an investment banking analyst actually does: AI is coming for Wall Street: Banks are reportedly weighing cutting analyst hiring by two-thirds (paywalled for me on desktop but it's loading fine on mobile):
I don't know how to evaluate the claims in the article because I have little understanding of what a banking analyst actually does on a day to day basis. How much of it requires "thought" (not thought of incredible complexity and originality, but thought nonetheless) and how much of it is just plugging numbers into Excel in a relatively formulaic fashion?
In general I lean towards being skeptical of these claims, especially in domains where I have little expertise, because the dominant pattern of the last 2 years is that people who don't know much about X tend to overestimate how good AI is at X.
If I compare this to a domain where I do have some knowledge (computer programming), most of the tests that people use to demonstrate LLMs' coding ability aren't particularly representative of what programmers do on a daily basis. Sitting down and opening a new blank file and "writing code to do X" is certainly part of the job, and it can be a bigger or smaller part of the job depending on what type of organization you're at and what type of project you're working on etc, but it's not the whole job (for some programmers, it's a very small part of it!)
So I'd like people with more domain knowledge to weigh in on what aspects of these financial jobs are liable to be automated today and what the forecast for the field is like.
I believe the big thing for them is availability and consistency. Like a McDonalds worker with great grammar and can do algebra and make an identical Big Mac at 4 am.
Simplistically Mr Banker meets with CEO at 3 PM on Tuesday. He gets feedback from the client on what they are thinking. At 7 PM he gives updates to his analysts. At 4 am the analyst have all the materials updated. At 7 am the printers have finished documents. At 8 am the banker has the new reports in his briefcase. At 9 am the Banker again meets with CEO and closes the deal.
And everything has to look perfect because it’s a big deal. Just having the correct numbers won’t work because it looks sloppy for that size of deal so hours spent picking out just the right shade of blue for a pie chart.
That’s my understanding of the job.
It’s also that even though analysts and associates are paid very well by general standards, they’re only paid a very small proportion of the deal fees the bank makes. On a big $20m fee (when apportioning based on bonuses and salary for the subsequent year), ‘the bank’ might make $10m, the ‘vice chairman’ (typically semi-retired senior banker still affiliated with bank because of their connections, some banks will have a different title) makes $2m, the head of the industry team (‘global head of industrials’) might make $1m, the two or three MDs involved may make $500k each, then you down from there through directors/EDs, VPs, associates and down to analysts. Of an analyst’s $60k or $80k bonus (maybe there are four or five staffed on the deal across an industry team and execution), perhaps $10k comes from this deal if one had to pick a number. (This isn’t how bonus pools work, but it illustrates how small the analyst’s share would be).
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