Is Your Wall Street Analyst a Robot?

Data about wealth and value is increasingly created, aggregated and reported by computers and algorithms. Even wealth itself is mostly no longer tangible, but the intangible digital manifestation of itself as reported by bits and bytes.

So perhaps more to the point, do you really care who - or what - your analyst is as long as the information they provide is timely and insightful?  JL

Stephanie Yang reports in the Wall Street Journal:

Programs take data from filings, databases or internal documents and then use algorithms to synthesize the information for corporate presentations or product descriptions.
Each day, Wall Street churns out millions of words encouraging investors to buy or sell stocks, bonds and mutual funds.
In the future, more of those words might not be written by humans.

As automation in financial services grows, computers and algorithms have taken on some of the traditional work of traders, clerks and financial advisers. Now, a host of startups that use artificial intelligence to write news stories and other reports have set their sights on writing work at banks and financial-service companies.
Narrative Science Inc., which launched in 2010 with computer-generated news articles, added products for financial-services businesses in 2013. Those firms now account for 60% of the company’s client base. Last year, Automated Insights added insurance company Allstate Corp. ALL 1.19 % to a roster of clients that includes Yahoo! Inc. YHOO 0.82 % and the Associated Press. Other startups offering automated reports for financial-services firms include Yseop, Capital Cube and Goldman Sachs GS 1.16 % -backed Kensho Technologies Inc.
As artificial intelligence takes on ever more tasks, Wall Street is getting more comfortable putting it to use. Services launched in recent years are now gaining traction because the technology has become more sophisticated and banks are looking for ways to cut costs and increase efficiencies.

Programs such as Narrative Science’s essentially take data from filings, databases or internal documents and then use algorithms to synthesize the information for corporate presentations or product descriptions. The banks and the mostly private firms dealing in automated writing declined to discuss details such as cost. But in general, the software can produce information summaries quickly and cheaply, enabling businesses to publish more reports and marketing materials.
Swiss bank Credit Suisse Group AG CS 3.60 % is using automated writing to provide clients with corporate summaries on thousands of companies. Fund companies T. Rowe Price Group Inc. TROW 1.07 % and American Century Investments are testing automated-writing products that would tell customers how the companies’ funds invest money in a variety of stock-market strategies.
Still, the abilities of automated writers remain limited, critics say. Research experts say computers still have trouble processing the qualitative information central to most analysts’ jobs. Analysts, for instance, work to maintain relationships with company executives and clients, and look for nuances in executives’ comments that an algorithm wouldn’t necessarily pick up.
Research reports that don’t add insight simply increase the noise, says Barry Hurewitz, chief operating officer of UBS AG’s investment-research division, noting that large brokerage firms already produce more than 30,000 research reports each year. “Analysts need to advance clients’ thinking with their research, not report on what is happening,” he said.
Some say it is a matter of time before the computers catch up. Bigger swaths of the investing world now use computers and algorithms to find relative value in stocks or to tell investors how they should divvy up their nest eggs.
“It’s a very hot debate about whether the financial analyst community is going to be decimated by algorithms,” said William Trout, a senior analyst at research and consulting firm Celent. While analysts may not be concerned today, he said, “disruption, when it happens, happens very fast.”

Writing Without Writers: Programs take data from filings, databases or internal documents and then use algorithms to synthesize the information for corporate presentations or product descriptions. Photo: iStockphoto/Getty Images

‘Analysts need to advance clients’ thinking with their research, not report on what is happening.’
—Barry Hurewitz, chief operating officer of UBS AG’s investment-research division

‘There is no way that Allstate could produce what we are doing today having analysts do all of that.’
—Ryan Dunn, product operations manager at Allstate, which uses automated services in assessing internal sales performance

The discussion of which jobs may ultimately be replaced by robots has been a hot topic lately. A 2013 study by two Oxford University professors ranked about 700 occupations by their likelihood of such elimination. Financial analysts were ranked as safer than about 70% of the occupations, but technical writers were ranked as more endangered, safer than only 25% of jobs.
Some large brokerage firms in recent years have cut the number of analysts they employ, but smaller firms have been hiring, according to a paper by Cornell University assistant professor Kenneth Merkley. The research expert predicts the number of analysts will continue to fall at larger firms, in part because of the push to automate. “Anyone that doesn’t bring something to the table” will be displaced, Mr. Merkley said.
Companies providing the technology to Wall Street insist that the goal isn’t to replace jobs. “Analysts are overwhelmed with the work they typically have to do,” Narrative Science chief executive Stuart Frankel said. Automation “frees them up to do higher-value work.”
Credit Suisse uses Narrative Science’s platform, Quill, to generate company summaries for its research database HOLT. At a financial technology conference in 2013, Credit Suisse managing director Tim Bixler said Quill helps the 20-person HOLT writing team to spend more time meeting clients. Since then, Quill has increased the number of written summaries Credit Suisse’s HOLT platform provides to 5,000 companies, up from 1,500, a spokeswoman for Narrative Science said.
American Century Investments is incorporating Quill’s ability to write up rudimentary fund recaps, while T. Rowe Price is working on using Quill in some of the firm’s investment-strategy descriptions. A unit of Fidelity Investments is exploring Quill and similar technologies to see if they can turn data into personalized communications for consumers, Senior Vice President Sean Belka said.
Meanwhile, Allstate is looking into how it can use mechanized writing with customers. It currently uses Automated Insights to measure internal sales performance and issue recommendations for improvement.
“There is no way that Allstate could produce what we are doing today having analysts do all of that,” product operations manager Ryan Dunn said. “We thought it was a novel idea and we wanted to jump on it.”