Conference Presentation, Panel, Fireside Chat
Digitizing Wall Street: How Technology Is Changing the Future of Finance
Milken InstituteFelix Salmon, David Rockefeller Jr., Mike Weil, Rich Daly, Adina Friedman, David Kaplan, Matthew Walkermann, Nicole Forsgren, David Levinson, Matt Brittin, Eddy Moretti, Adina Kanwisher, Jonathan Zittrain, Adina Srivastavadi, Matthew Accarrino
- Technology is expected to evolve rapidly, with investment banking maintaining a "high touch, high proprietary intelligence" model while sales and trading see tech as a key enabler for cost reduction, efficiency, and settlements.
- Financial advisors and firms lacking technology will face a losing battle, as successful retail adaptation requires leveraging tech to manage the shift from single investment returns to comprehensive financial planning driven by the move from defined to defined contribution models.
- The industry is at an inflection point where deploying technology to eliminate duplicative costs is anticipated to occur next year or in the near future to restore Return on Equity (ROE) lost to regulation and shorten settlement cycles from three days to two days.
- Significant regulatory complexity is projected to increase rather than decrease, with regulators investigating trading technologies for fairness without public reporting, while the capital markets face unprecedented fragmentation across over 30 U.S. exchanges.
- Technological innovation is expected to accelerate faster than regulatory capabilities, particularly in markets like sub-Sahara and emerging economies where lighter regulation and high demand for peer-to-peer approaches foster innovation outside the United States.
- Retail investors may face increasing friction competing against institutions utilizing terabytes of data and high-performance algorithms, though a shift toward direct, non-telephonic engagement is anticipated among Millennials.
- The market is expected to transition from a paradigm where robo-advisors are novel to one where AI systems provide substantially better advice than humans, with current discussions on robo or bionic advisors likely becoming historical memories within a decade.
- Blockchain technology offers theoretical potential to reduce counterparty risk and create electronic cash markets, though its ability to globalize finance or allow African technology to dominate the U.S. market remains uncertain.
- Cultural and governance issues in the Forex space regarding LIBOR and RAIDS are primarily fraud-related, while the Forex market is expected to see orderly progression in China rather than disruptive shifts.
- While some argue technology will de-emotionalize decision-making to prevent herd behavior, uncertainty remains regarding whether AI and robo-advice will mitigate or exacerbate risks during significant market corrections like a 20% drop.
- Disintermediation of capital raising via technology is unlikely to occur until investors no longer value third-party validation, though electronic auction mechanisms for IPO portions may emerge while still utilizing broker-dealers.
- Regulators may encounter challenges monitoring systemic risk if personal service is entirely removed and liquidity shifts to non-regulated entities, necessitating a human facilitator to interpret client stories and goals that algorithms may miss.
- Humans will remain integral to investment models for creating algorithms and making final judgments, ensuring a continued marriage of human capital with technology to drive efficiency and access to opportunities.
- Data mining presents a commercial opportunity to reduce repetitive interactions and better serve customers, while hope exists that algorithmic approaches could eventually reduce the frequency of mass market panic behaviors.
- The U.S. economy currently holds $5 trillion in active assets, $1 trillion in passive investing, and $19 billion in rapidly growing robo-advising, indicating a clear trajectory for digital transformation in wealth management.