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Morning Coffee: Goldman Sachs & JPMorgan's 22-year-olds on $100k salaries may go extinct. The banking associate who’s forbidden from playing golf with clients

There are some things people can say which are presumably meant to sound reassuring but just aren’t. An example familiar to bankers might be “there are no planned redundancies at present” or “we are not experiencing trouble finding liquidity”. 

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Anyone hoping to work in investment banking is likely to be worried right now that in the words of Jamie Dimon, “artificial intelligence may reduce certain job categories or roles” . They might be reassured to hear JPMorgan spokesman Nick Carcaterra saying that “In the near term, we anticipate no changes to our incoming analyst classes”. Or they might not.

Because apart from anything, in a fast moving field like AI, the “near term” isn’t a very long time. And it seems like many of the jobs of junior bankers are really quite close to being replaced. Goldman has a piece of software under development which can “turn text and data collected from thousands of sources into page presentations that mimic the bank’s typeface, logo, styles and charts”. And presumably the robot will never need to “pls fix” any misplaced logos or incorrect fonts. 

Of course, the fact that junior bankers’ current tasks are being replaced isn’t necessarily bad news.  Employers will still need senior bankers, and so they will still need some way to keep that pipeline full. But it might affect the recruitment process, in a manner not necessarily to the advantage of the elite young graduates who currently get paid six figure sums to hang around for three years editing PowerPoints at 3am while looking for private equity jobs.

At present, the deal is that the bank will provide years of expensive training in return for what former banker Gabriel Stengel calls “One hundred percent drudgery”. If they don't need the drudgery anymore, banks might be a little more reluctant to provide the apprenticeship.

This is particularly true given that some banks expect to be able to automate some of the more advanced parts of the job as well. Jay Horine, JPM’s co-head of investment banking, thinks that AI will be able to identify clients ready to do a bond offering, for example. 

In that sort of world, banks might be looking for different qualities in their recruits; they will have less need for extremely dedicated and ambitious graduates who are prepared to put in hours learning the nitty gritty of the business and more need for creative thinkers, good people skills and the ability to write a prompt for a large language model. As Horzine says, “My hope and belief is it will allow the job to be more interesting”.

Perhaps the banks will start recruiting junior bankers from arts degrees or even from wholly different walks of life? Or perhaps they just won't recruit junior bankers in nearly such large numbers as before: banks like Goldman Sachs and Morgan Stanley are reportedly contemplating cutting the size of their new analyst classes by two thirds as AI assumes their tasks. 

Artificial intelligence seems less disruptive in sales and trading jobs, where it seems the future might be a lot more rosy; according to BNY Mellon’s chief executive, research analysts are now using AI to read and summarise overnight data and managing to get two hours more sleep.

Elsewhere, bankers doing deals on the golf course is one of the great clichés of the industry.  So you might have thought that Stewart Hagestad of BDT & MSD Partners might be tearing it up.  He’s not just a good golfer – he’s actually in with a decent chance of winning the US Masters.

But you’d be wrong.  In fact, according to his official interview on the Masters website, Gregg Lemkau’s shop just doesn’t permit this.  Hagestad says that “Client golf is not a thing; that is not in the ethos of the organization”

Even if it was in the ethos of the organisation (and one suspects that if Elon Musk asked for a quick eighteen holes they’d stretch a point), it’s probable that no banker worth his nine-iron would let Stewart Hagestad within a 300-yard drive of a client.  The point of playing golf as a banker is to let the client win, but to let them think they won fair and square.  Playing against a Masters golfer and losing might be frustrating. But for any client with an atom of self-awareness, playing against a Masters golfer, who just happens to be an associate at your advisory bank and winning would be humiliating in the extreme.

Meanwhile …

Possibly the most exquisitely embarrassing moment in accounting history – KPMG has agreed to pay a $25m fine, the largest in the regulator’s history, over a scandal relating to auditors cheating on their exams. (FT)

Second tier European firms continue to be one of the best bids in the market for rainmakers.  Santander has hired Rob Losquadro from Perella Weinberg, Michael Geber from William Blair and Paul Hwang from Moelis … (Bloomberg)

… while Unicredit has taken US healthcare ECM specialist Paul Hwang from Barclays. (Financial News)

Larry Robbins of Glenview Management is trying to have it both ways – he’s moving his family home to Florida while keeping his business in New York.  Apparently he will “largely abide” by the firm’s three-days-in-the-office policy, but when you’re the founder you can probably stretch a point. (Bloomberg)

Even if you can find an associate who is exactly the right level of talent to give the client a good game, it’s apparently almost impossible to get membership of a good golf club in the “billionaires’ playground” that people like Larry Robbins are moving to.  Being a billionaire doesn’t necessarily help, nor does being a celebrity. (FT)

A very, very bizarre story about allegations of “slave contracts” against the former CEO of a fintech firm that’s recently signed a joint venture with HSBC. (NY Post)

The industry strikes back – Morgan Stanley analysts are predicting 19% fee growth for the Q1 results season, partly driven by the banks managing to recover market share from private credit. (WSJ)

And potentially very good news for the embattled UK domestic small cap bankers – the “unbundling” of research fees from trading commissions which destroyed their economics is going to be reversed. (Financial News)

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AUTHORDaniel Davies Insider Comment

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