Automation in Investment Banking

The largest technology companies in the world are throwing their capital at automation and artificial intelligence. Even the hamburger flipper is becoming fearful of losing his job. Investment bankers are certainly no exception. Finance professionals are getting more accustomed to working with machines and computers. The savviest and most time-focused bankers are those that not only understand the avalanche of automation that is coming, but they are fully embracing it and using it to assist them with the mundane and rote tasks so often associated with their craft.

What can be automated?

I have been adamant about the fact that while investment bankers are professional financial experts, their tactics for getting deals over the finish line include nothing more than effective marketing. I would argue the most successful investment bankers are 80% sales/marketing and only 20% finance. Most of the best are simply salespeople dressed in finance clothing—quite literally (except perhaps for those bankers that do not following the style of most New York investment banks by wearing a suit to work)

And while the image of _______ dressed in _________ clothing may conjure up nefarious images familiar from the Wolf of Wall Street, the image is a constructive one. That is, most of what investment bankers spend their time doing is either selling themselves as the banker of choice or selling their client’s securities as being “A-grade.” In this process, there are many tasks present that already can and should be automated. It’s one of the reasons we’re are building a marketing automation and deal origination engine with that specific need directly in mind.

Time and task management tools for investment bankers can also help in streamlining complex problems for deal makers. Project management software built especially for investment bankers is an absolute necessity here. Complex Gantt charts for all the various processes inherent in investment banking including buy-side M&A, sell-side M&A, capital formation, due diligence and full M&A integration not only help to save time, but they can also ensure specific tasks fail to slip through the cracks. Project management also bolsters accountability.

Other boring industries that are tied closely to investment banking are seeing massive disruption, including transfer agencies (blockchain anyone), escrow, and regtech for compliance.

What cannot be automated?

While many operating procedures in mergers, acquisitions and investment banking can ultimately be automated, the majority of investment banking tasks still require a warm body and—in most cases—an incisive mind. Underestimating or, even worse, ignoring the human capital element of doing deals would be foolhardy.  Many industry old-timers would argue the focus on technology in this market is not only wholly unnecessary, but a distraction from getting real work done. Those that understand the ability to use technology to both scale and clean existing standard operating procedures will see a massive influx of deals, but also be able to close more deals using less human intervention. In order to do so effectively, the systems need to be very dialed.

The writing is on the wall: margins in investment banking are decreasing and they will continue to marginalize. As they do, the most successful deal makers will be that way because they figured out a way to reach scale using humans + technology.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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