Technology is a great democratising force on Wall Street and is forcing management teams to rethink their sales and trading businesses. Automation, electronification and digitisation means the traditional advantages exploited by capital markets incumbents like capital and scale are no longer the key differentiators going forward. Consequently, technologists have made the transition from cost centre to front office and are now considered the key source of competitive advantage.
Automation has started to move into areas of sales & trading that would have seemed impossible only a few years ago. For example, Goldman Sachs recently announced they can price 20,000 bonds algorithmically, without a human trader. Salespeople and traders fear what this may bring.
But while a lot has been written about the tech wave on Wall Street, it is not yet as ubiquitous as it is made out to be. Yes, there are brilliant strats and developers working on creating the Bank of The Future. But they account for the minority of workers on a trading floor and there is a healthy tension between the old guard and the new.
The reality is, the workflow for most salespeople and traders today have not changed in 5, 10 and even 20 years. There is no question that exciting technology is being created all over Wall Street, but most front office professionals are removed from it.
I should know, I was one of them.
Allbirds rather than loafers
Today, there is an uneasy feeling among salespeople and traders. They feel like the world is moving on without them. They look around the trading floor and see an increasing number of people wearing Allbirds rather than loafers, who code rather than make calls. It seems there is an inevitable shift away from schmoozers and risk takers towards new businesses run by programmers and quants. As one of the salespeople at a major firm put it, “I feel like I work at the microwave department at GE.”
As a veteran salesman on a trading floor, I was worried too. After 13 years in finance, I had vague notions of what I needed to do to stay relevant in a rapidly changing Wall Street but formulating a plan was difficult. I knew I had to take steps to change my trajectory and position myself differently. But how?
One thing that was clear to me was that I needed to become fluent in the emerging technologies that will define winners and losers in the future. In finance speak, I needed to find ways to enhance the net present value (NPV) of my career by learning more about A.I. That took me on a path to online classes on data science, after-work visits to the library and coffees with anyone willing to share their perspective (with a notebook in hand).
Finally, after a period of immersing myself in A.I., I walked-the-talk and joined a fin-tech startup focused on bringing A.I. to Wall Street. In that decision, I left the first and only job I’ve ever had and dove deep into tech. “I’d rather try to be a disrupter than be disrupted,” I told myself.
Over the last year, I have lived and breathed the subject of digital transformation in capital markets. I have had the privilege of working with leaders, technologists, and innovation labs across Wall Street. And I want to share my thoughts with sales & trading professionals who may feel lost, marginalised or hopeless.
Machines will take care of the mundane
To all my friends and ex-colleagues performing “traditional” tasks in sales and trading, I assure you that your jobs are still important. They will remain important. The proliferation of A.I. means humans working in sales and trading become more important, not less.
The winners of tomorrow will not simply be the banks with the biggest technology budgets, but rather those that can get their current workforce to unlearn and relearn, to prioritise data over memory, and to navigate organisational resistance. Firms that thrive will be those that can encourage these behaviours and ease the tension between old and new. The most forward-thinking banks understand this and are implementing organisational change for the new world.
One of A.I.’s main applications on Wall Street today is its ability to create digital memory. Once data is accurately extracted and stored, a bank can digitize the institutional knowledge of its professionals. While that may sound scary, these tools help humans perform at a higher level and part with muscle memory and instinct. As one bank executive told me, “Traders in the past relied on memory and guts. That’s just not good enough anymore.” He’s right.
A.I. is here to make traders and salespeople better, not to entirely replace them. The Bank of the (near) Future, will have algorithms that find missed opportunities with clients, predict counter-parties for trades, and quantify customer relationships. You will be more productive at your job (and happier) by letting machines take care of the mundane.
No more swaggering jocks
One caveat is that the increasing use of A.I. will require you to approach your job differently. In trading, it is no longer about trying to time the market, but rather to find the other side more quickly. In sales, it is no longer about fancy dinners with clients, but rather analysing how response time correlates with execution or scrutinising hit ratios by client.
As a result, the skill sets required to be a successful trader or salesperson are changing. You must internalise that you are not limited by the scope of your current job. Make the effort to learn about the advancements that are being made around you. Connect with the strats and digital strategy teams on your trading floor. They need your input and domain expertise. And most importantly, visualise what your job will be like in 2 years and take concrete steps to acquire new skills.
OUT are the swaggering jocks that rely on gut feeling to take risk.OUT are the slick salespeople with seemingly unending charisma and expense accounts.
IN are the quants, strats, and programmers. IN are those that can marry experience and relationships with curiosity and an embracing attitude towards change. But most importantly, IN are the experienced professionals that can unlearn past ways and keep learning new ways.
The new Wall Street is for nerds … and it’s not too late to become one.
Junta Nakai is the Global Head of Business Development at Selerity, a financial technology firm that specialises in bringing A.I. to Wall Street. Prior to that, he spent 13 years at Goldman Sachs, most recently as Head of Asia Equities Sales in New York.