Robots Aren't Quite Ready to Replace Wall Street's Salespeople
This post originally appeared in Money Stuff.
There is an expression on trading floors, "3 Go 1 Go," which is the sequence of keys that you use in the Bloomberg terminal to forward a message. It is used as a dismissive term for a certain type of stock or bond salesperson, who is imagined to just sit at his computer getting messages from his traders and research analysts and mindlessly forwarding them to his customers. When I worked at Dealbreaker, a reader once sent us a photo of a fancy car with a "3 GO 1 GO" license plate. The joke was, it can be pretty easy to get pretty rich doing pretty simple information intermediation. If your trader has bonds and your customer wants bonds and you are the only point of contact between them, you can just forward messages back and forth between them and grow rich in the process.
I thought of that when I read this:
“Alexa, ask JPMorgan what the price target for Apple is.”
It’s a request that JPMorgan Chase & Co. institutional clients can now get quickly answered through Amazon.com Inc.’s ubiquitous voice-activated assistant. The bank and the e-commerce giant have partnered to provide JPMorgan’s Wall Street users with another way to access its research. Alexa is able to send analysts’ reports and related queries, and the bank is testing other features, like providing prices on bonds or swaps, according to David Hudson, global head of markets execution for the New York-based bank.
If your salespeople are just forwarding pricing runs and research reports to clients, then they can be replaced by a computer. If your salespeople are just in the business of pushing a button, they can be replaced by a button.
Of course they're not. The positive spin here is not that salespeople will be replaced by virtual assistants, but that those virtual assistants will take on some of the salespeople's dumber and more administrative tasks, letting the salespeople focus on more important things, like deep meaningful conversations with clients or golf games or targeting exercises. Still there is some value to the dumb stuff too. It gives you a client contact, an excuse to talk to the client, a reason for the client to think fondly of you. If a client emails you to ask for your firm's Apple price target, you can also send her the latest research and suggest a derivatives trade that will pay off handsomely if Apple reaches that target. Alternatively, you can just quickly reply with the price target, and the client will be so grateful to you for not constantly pestering her with dumb ideas for derivatives trades that she will move more business to your bank. As a human, you can make a judgment about which approach will work better.
That might be harder for Alexa. Surely the virtual assistant can be programmed to pitch and up-sell all the time ("Alexa, ask JPMorgan what the price target for Apple is." "Before I do that, can I interest you in some nice Microsoft structured notes from JPMorgan?"), but I suspect that will be even more annoying -- and easier to ignore -- from a robot than it is from a human. And if the robot just does the job quietly and competently, it won't exactly accrue a ton of goodwill for JPMorgan. No one feels gratitude to a robot; no one feels guilty constantly asking the robot for information without ever sending it a trade. You can see why banks would want to commoditize parts of their client relationships: It's cheaper, for one thing, and also it's usually better; I'd rather get my research reports from a robot than by calling up a pushy human who wants something from me. But the banks do lose something by commoditizing relationships: Relationship businesses tend to be more lucrative than commodity ones.
The average banker bonus in New York City was $184,220 last year, the biggest annual haul for Wall Street employees since before the financial crisis.
Those bonuses, which totaled $31.7 billion, up 17% from 2016, tracks with a broader rebound for bank stocks last year, boosted by the prospects of rising interest rates, faster growth and deregulation.
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