Are You Scared of AI or People with AI? How ChatGPT is gunning for financial jobs in 2023

The advent of ChatGPT is impacting the financial industry at unprecedented speed.

Investment banks, asset management firms, and hedge fund jobs are among the most lucrative positions in the industry - the average annual salary was $100,100 (US Bureau of Labor Statistics, 2020), double the national average. Investment banking and asset management jobs can earn $200,000 to almost a million dollars in the late 20s and 30s.

Due to such high costs, since AlphaGo, AI evangelists have been preaching about how AI will wipe the financial job boards clean due to cost-cutting. Still, in 2023, aside from execution algo and the use of AI in some hedge funds, most jobs have stayed where they are.

That might change fast.

The jobs were hard to replace because the nature of the job in investment banks and asset management companies is communication-heavy, relationship-centric, and highly context-dependent. Every deal is different, every Fed announcement and job report may have opposite impacts (like how the better-than-expected job creation brought the stock market down last month) at different times, and every client needs to be soothed. Every slide on the Powerpoint needs to be revised until the last moment.

Aside from client management and PPT trench battles, the new tool ChatGPT can now understand context and intention. This time, it is here to stay.

Nvidia CEO Jensen Huang excitedly proclaimed that ChatGPT is AI’s “iPhone moment.” Considering that Nvidia is the world’s most prominent producer of AI chips, it’s his job to shout at the top of his lungs about how awesome AI/ ChatGPT is - especially when Bitcoin mining is less cool now. But he did have a good point – ChatGPT is the first in-your-face, multi-purpose consumer tool. The AI is not hiding behind translation, the Google search engine, Netflix recommendations, or Tesla self-driving algorithms. For ChatGPT, the AI is the product itself.

Within the financial industry, my friends first clamored in the last few weeks, “awesome, now I can write the yearly reports and emails much faster.” A couple of weeks later, their enthusiasm quickly evolved to “oh gee, this thing might as well take my job.” 

Well, not today. But maybe soon.

The ones who haven’t considered this possibility were the ones who haven’t used it. If we stretch the iPhone analogy a bit further – ChatGPT is the first version, akin to the 2007 iPhone, with few apps in the app store. But the GPT model is being integrated into Bing and will soon have internet access. Google’s Bard, despite the recent Paris showing fiasco and the evaporation of US100 billion in market value, is hoarding all the necessary resources internally (after all, Google was the one who practically “invented” the so-called Large Language Models (LLMs) and put them to practice in search and translation). Imagine what it can do in 12 months from the competition among behemoths and hundreds of start-ups pushing in the same direction.

One of the primary concerns about using AI in the financial services industry is its potential to replace human workers. In investment banks, the use of AI can reduce the headcount needed to perform routine tasks by more than 50%, according to a report by Accenture. That said, AI can also create new jobs and improve existing ones. For example, in investment banking, AI can analyze market data and provide insights to help banks make more informed investment decisions. According to a McKinsey report, using AI can reduce the headcount required to perform these tasks by up to one-third. This can lead to significant cost savings for asset management firms and enable them to provide more cost-effective solutions to their clients.

Similarly, asset management firms are also benefiting from the use of AI. For instance, BlackRock has developed an AI-powered platform called Aladdin, which manages over $21 trillion in assets. The platform uses AI to analyze market data, identify trends, and provide insights into the performance of individual assets. AI has helped BlackRock generate significant returns for its clients and stay ahead of the competition.

In addition to the benefits of AI, there are also concerns about the impact of its use on the job market. The World Economic Forum predicts that AI will displace 75 million jobs by 2022, particularly in jobs that involve routine tasks. However, the same report suggests that AI could create 133 million new jobs, particularly in data analysis, software development, and cybersecurity.

In commercial banking, AI is used in a wide range of white-collar jobs, including finance, human resources, and marketing. For example, JPMorgan Chase has used AI to automate routine tasks in its finance department, enabling its staff to focus on more strategic work. The company has also used AI to analyze financial data, identify patterns, and make more informed investment decisions. In human resources, AI is being used to analyze resumes, identify suitable candidates, and even conduct initial interviews. In marketing, AI analyzes customer data, identifies patterns, and provides insights.

To address these concerns, companies are investing in training and reskilling programs to help workers transition to new roles as the use of AI increases. For example, JPMorgan Chase has launched a program called “New Skills at Work,” which aims to provide training and support to workers who risk losing their jobs due to automation (https://www.jpmorganchase.com/news-stories/nsaw-first-annual-report). The program is designed to help workers develop the skills they need to transition to new roles and industries.

 As the industry continues to evolve, workers must stay informed, develop new skills, and adapt to the changing landscape to remain competitive and continue contributing to the industry's growth and success. To stay ahead of the curve, financial service workers must continue learning and developing new skills. By visiting and being informed about the latest trends and technologies, workers can position themselves as valuable assets to their employers.