Thanks to AI — artificial intelligence — the new slogan on Wall Street might well be: “Brother, can you spare a dime?”
The trend toward AI — and how we can benefit as investors — is part of Profits Unlimited Editor Paul Mampilly’s investment focus. He already has stocks in his portfolio that are reaping the rewards of their AI focus.
In the case of Goldman Sachs — noting the tedious, costly process of setting up an initial public offering, or IPO, for its clients — the investment banking giant set out in 2015 to see how much of the costly, paperwork-heavy process could be successfully automated by software.
This week, the investment bank talked to Bloomberg about the results of that experiment. And if I were an investment banker, I’d be very worried right about now.
Investment Banking by Robots
Goldman tallied a checklist of 127 steps its people have to go through to prepare an IPO. AI software, it turns out, can easily handle about half of those steps.
What about checking legal and compliance issues? AI software handles all that too.
As Bloomberg notes: “Hot links trigger processes or fill in forms. Information used across multiple forms is populated automatically.”
In the past, that’s always been a problem for software systems. They were “smart” — but not smart enough to figure out contextual mistakes such as errors, oversights or boilerplate info that’s in the wrong section.
As Goldman Sachs is proving, that’s not the case anymore.
AI is starting to make inroads in other areas previously thought too complex for software.
Bond Traders’ Nightmare
I’ve bought and sold corporate bonds for my own account. It’s rewarding — but it ain’t as easy as buying and selling stocks, that’s for sure.
Want to buy the bonds of “XYZ Widget Co.”? There might be a half dozen different bond issues to choose from — if you know how to look for them.
Want to know how much it might cost you to own a batch of those bonds? You have to ask your bond dealer for a “quote” (which includes his own hefty markup).
My point is that bonds have always been a complex, opaque, not-easily-understood marketplace.
Recently, financial technology (fintech) firms have started rolling out products like Trumid Financial — an AI-powered corporate bond-trading platform — to automate much of that process.
Accounting, too, is another piece of financial turf soon to be conquered by AI. The consulting firm Accenture recently projected that up to 80% of traditional accounting tasks performed by humans will be automated.
Like the Goldman Sachs scenario above, it may force many accounting professionals to rethink how they deliver value to their clients — but it also creates a myriad of investment opportunities for investors watching this new digital revolution unfold before our eyes.
Jeff L. Yastine
Editor, Total Wealth Insider