Terminator Comes To Wall Street As Firms Try Out Automated Analyst Reports

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Leading Wall Street firms are trying out research reports written by artificial intelligence, with a few start-ups offering software to generate company summaries for research database.

Some analysts wonder whether the financial analyst community could be decimated by algorithms.

Wall Street automating research report using artificial intelligence

Thanks to growing automation in financial services, computers and algorithms have taken on some of the traditional work of traders, clerks and financial advisers. However, recently a host of start-ups that use artificial intelligence to write news stories and other reports are training their eyes on writing work at banks and financial service companies

A McKinsey & Co report highlights the advances of “brilliant” machines will astound society and have potential to revolutionize the C-suite, encroaching on duties of senior managers. As detailed by ValueWalk, Deep Knowledge Ventures, a Hong Kong venture-capital firm, has gone so far as to integrate a decision-making algorithm into its board of directors.

According to a Wall Street Journal report, Narrative Science Inc., with computer-generated news articles, added products for financial services business in 2013. Now those firms represent 60% of the company’s client base. Some of the other start-ups including Yseop, Capital Cube and Goldman Sachs-backed Kensho Technologies Inc. too have embraced the trend to offer automated reports for financial-services firms.

Interestingly, the report points out that Wall Street is getting more comfortable putting artificial intelligence to use. With banks focused towards cutting costs and enhancing efficiencies, these services have recently gained more traction.

The artificial intelligence based programs essentially take data from filings, databases or internal documents, and subsequently use algorithms to synthesize the information for corporate presentations or product descriptions. This software can produce information summaries quickly and cheaply, enabling businesses to publish more reports and marketing materials.

More firms embrace AI technology

Pointing out the latest trend, Barry Hurewitz, COO of UBS’s investment-research division said: “Analysts need to advance clients’ thinking with their research, not report on what is happening”.

In a paper published by Kenneth Merkley, assistant professor at Cornell University, he predicts the number of analysts will continue to fall at larger firms, in part because of the push to automate. It is significant to note that some large brokerage firms have already trimmed the number of analysts they employ.

Some of the other firms that have embraced the latest trend include Credit Suisse which uses Narrative Science’s platform, Quill, to generate company summaries for its research database HOLT. American Century Investments is also incorporating Quill’s ability to write up rudimentary fund recaps, while T. Rowe Price is working on using Quill on some of the firm’s investment-strategy.

Others exploring similar technologies include a unit of Fidelity Investments to check whether they can turn data into personalized communications for customers.

As detailed by ValueWalk last April, Hong Kong financial tech firm Aidiya plans to launch an AI-managed long/short equity hedge fund this summer.

However, some researchers point out that computers still have problems processing the qualitative information central to most analysts’ jobs. For instance, analysts work to maintain relationships with company executives and clients and look for nuances in executives’ comments that an algorithm wouldn’t pick up.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports