A few years have passed since Reuben Advani’s first book “The Wall Street MBA” was published, and when his new career as CEO of the Global STEM Alliance for the esteemed New York Academy of Sciences began.
Still, Advani, who in his new role is responsible for increasing STEM’s appeal to help solve some of the world’s most demanding problems, remains well-versed in all areas Wall Street.
One of Advani’s early goals was to help the layman better understand what drives the financial world. And that’s exactly what he accomplished in writing “The Wall Street MBA,” which is now in its third edition. The updated version delves further into exponential technologies and the surge in fintech companies worldwide.
Meanwhile, Wall Street, like most other industries or major organizations, is facing its own set of tests amid an ever-changing technological landscape. Yet while Advani may physically be removed from the historic stomping grounds of bears and bulls, but he’s still well-acquainted with its framework and challenges, including ways in which automation is affecting everything from daily trading to stock valuations.
In this episode of Pivot Factory podcast, Pivot Factory CEO Michael Leadbetter talks to Advani about the impact such changes are already having on Wall Street, and the disruptive forces knocking on its door.
will automation redefine wall street?
From manufacturing and retail to agriculture and banking, automation is being implemented across industries, raising concerns about machines replacing humans in the workforce. Wall Street is no exception.
“On the technology side, there’s been a distinct movement towards automation,” Advani tells Leadbetter.
“I think you’re seeing what’s happening today in the financial markets, which is largely tied to algorithmic trading, which is really the first iteration of artificial intelligence (AI) in the capital markets,” he adds. “Decisions are now triggered by various movements in various financial markets, and in turn, stipulated by probabilities. I think as technology advances, there will be even more variables that affect these types of movements in financial markets.”
“I have to believe that fintech is making a level of greater accessibility across investment classes...Main Street is now afforded the opportunity to recognize the return that previously only Wall Street and institutional investors recognized.”
These effects are already noticeable, according to Advani.
“What we noticed in just the last couple of months is that minor swings turn into major swings,” he adds. “When the Dow [Jones Industrial Average] drops 200, it easily drops 600, so this is a product of algorithmic trading.”
Indeed, computer-driven trading is increasing in frequency, and as Advani notes, may be the cause of dramatic swings in the market in recent months.
CNN Business last year quoted one strategist who estimated that “computers account for 50% to 60% of market trades.” The percentage increases dramatically when the markets are “extremely volatile,” according to the report.
Advani dives deeper into this topic on the podcast, and uses Apple as an example of how these trends impact valuations.
The Fintech EffectFinancial technology, more popularly known as fintech, has made significant strides in recent years as an alternative to legacy banking institutions. Advani thinks these online financial outfits are doing much more than simplifying daily banking activities.
“I have to believe that fintech is making a level of greater accessibility across investment classes,” he says, adding that “Main Street is now afforded the opportunity to recognize the return that previously only Wall Street and institutional investors recognized.”Specifically, fintech has enabled Main Street to make “more informed decisions” through investments in data analytics, and reduced fees facilitate greater returns for small businesses, Advani notes.
He adds: “I think Fintech is a game-changer for Main Street. And I see a couple of areas evolving in real time. One is the advent of robo-advisors. Previously people needed investment advice, they turned to their local investment advisor or their local brokerage house...but thanks to artificial intelligence, the robo-advisors have proven to be quite successful. Folks on Main Street are able to get solid investment advice all through their computer at a very low cost.”
That these companies are using blockchain as part of their processes only makes transactions more transparent and expedient.
“What that ultimately means,” Advani says, “is lower fees for all parties involved.”
So, what does the rise of automation mean for the workforce? Well, humans still have a significant role to play in the financial industry, but job descriptions may evolve as organizations continue to embrace automated technology.
“There will be individuals giving advice,” says Advani. “There will be individuals representing institutions and making key decisions, but much of those decisions will be largely based on technology. So I think you’ll see a movement away from human-based analytics, more towards technology-based analytics.”
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The Pivot Factory Podcast is a Morey Creative Studios production.
The Pivot Factory Podcast is hosted by Michael Leadbetter, and engineered and produced by Michael Conforti, Rashed Mian and Christopher Twarowski. Jed Morey is the executive producer.