You make a good point about the growth in compliance and risk management roles.

I wonder what exactly makes it hard to automate some of the investment banking or sales & trading processes.


In this post I discuss the developments in technology and how they potentially able to affect future jobs in the industry. Popular, high-paying jobs, which are available now might not be around in 10 years.

Electronic Trading

It is no secret that eTrading platforms have long taken over in the foreign exchange, commodities and equity markets. Now the same thing is happening in the fixed income space. B2B and All-To-All trading platforms in the bond space are taking chunks of liquidity away from trading desks at investment banks and brokers. While many in the fixed income world thought they would be immune from the onslaught of eTrading, due to the heterogeneity of their products, the rise of eTrading has also hit the bond market in full force.

There are now over 20 bond-trading platforms, with a few key players taking an increasing market share in secondary trading. Most notably MarketAxess, which I believe has become the biggest eTrading player in the US and Europe. While the B2B model (the buy-side trading directly with one another) has not really picked up yet, the All-To-All platform MarketAxess has seen a strong increase in volume over the last 18 months.

The more third party platforms take market share, the more headcount reductions you will see in the bond space, especially on the trading side. However, as more and more trading (especially of smaller tickets) is done via Bloomberg’s etrading (which links directly to banks trading desks) the headcount on sales desks will most likely continue to decline.

Artificial Intelligence

In my humble view, the developments in artificial intelligence are the biggest threat to the employment market across all industries. While computers were so far only able to replace conveyor belt-type jobs, with the use of artificial intelligence almost all jobs are under threat of being ‘taken over by computers’.

A great example of this would be that a US law firm has recently hired the first A.I. lawyer. This makes perfect sense as an AI-based algorithm can read a case including all its facts, and then search through all digitalised law books and previous cases to determine the chance of winning the case and which arguments to highlight and why.

The use of artificial intelligence has also come into play in the hedge fund space. As algorithms already conduct around 85% of US stock trades, it is a natural progression to add A.I. technology into the mix. AI-based algorithms can detect patters and predict market behaviour and thereby adds a competitive edge to hedge funds who are implementing this type of technology into their trading strategies.

Where I see A.I. technology playing a role in banking is in the economic and currency research space, where A.I.-based algorithms can be used to computer forecasts and predictions in a much shorter time than a junior research analyst’s excel model. Here I could see some reduction in head count, due to the implementation of AI technology.

Also, in the already etrading and algorithm-heavy commodities and currency markets, I could see a further decline in headcount for traders as A.I.-based algorithms will soon be able to conduct a fair share of trading and replicate traders’ actions.

I could also see artificial intelligence play a role in investment banking when it comes to analyzing companies financial reports and suggesting possible merger and acquisition targets within the same sector. While this sort of technology could reduce the need for staff to some extent, you will still need investment bankers to pitch to clients and maintain relationships.

The Blockchain

The blockchain is the ledger technology that the cryptocurrency bitcoin is built on. However, this ledger technology can be augmented and adapted for other purposes than purely to record transactions of a digital currency.

There is the wide-spread believe in the financial industry that the blockchain technology will completely replace the current clunky and labour-intensive securities settlement process, and thereby drastically reducing costs for banks, exchanges and clearing houses. I agree with this view. It would make absolute sense to implement the blockchain in this way.

If the blockchain technology will replace the current securities settlement process globally, then it is safe to assume that well over 50% of back office jobs involved in the current process will become redundant.

Digital Banking

Online and mobile banking will severely disrupt retail banking in the years to come. In the UK there are a range of digital challenger banks, such as Atom Bank, Mondo, Monese, Fidor Bank, just to name a few. This will mean that headcounts in retail banking will decline and many branches will shut down. The younger demographic of banking services users prefers to bank online and via their smartphones. This demand-driven trend for more digitalization in retail banking will cost many banking jobs according to Citi.

Which jobs are likely to stay untouched by advances in technology?

In my opinion, the client-facing roles, i.e. sales and investment banking, will not be overly affected by advances in technology.

The head count in investment banking departments is mainly dependent deal flow in ECM, DCM and M&A and the bank’s stance on how much investment banking activities they want to be engaged in. I don’t really see how any of the new technologies mentioned above will cause a strong decline in jobs in that area.

While I do think sales roles will decline further as more trading becomes electronic across all asset classes, clients will still need a person to talk to in order to conduct larger or more complicated transactions. I can’t see sales roles disappearing.

I think research and economist roles may be reduced slightly as A.I.-technology can do many of the menial forecasting and modeling tasks. However, as these are still client facing roles they will not disappear either.

Compliance and risk management roles, which have been on the rise since the 2008 financial crisis, are still a growth area and won’t be taken over by technology anytime soon, in my view.