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Memo to the Finance World: Learn to Code

State Street

November 25,2016

When finance and technology intersect, things can pretty quickly get lost in translation.

Example? An asset manager wanting to tweak a piece of software to make investing flow a bit faster finds that she and the software developer—who has minimal knowledge of the financial industry—are speaking a totally different language.  

On the flip side, a developer can build a powerful new tool that has the potential to transform asset management, but the asset manager, with a limited grasp of the underlying technology, can't figure out how to make the most of what they’ve been given.

These are the types of situations that led Dr. Marco Gercke, the director of the Cybercrime Research Institute in Cologne, Germany, to make a bold prediction at our recent "Disruptive Technology and the Digitization of the Financial World" conference in Munich. Asset managers who can't write code, he said, have just a 50 percent chance of surviving in the industry in the next 20 years.

"There is a difference between putting an asset manager and a software developer in a room and discussing something, versus having someone who is wearing both hats," Gercke said. "If you can do it yourself, you can make sure it's done right."

Gercke's words hit close to home for Lou Maiuri, executive vice president and head of State Street Global Markets and State Street Global Exchange. Maiuri, who appeared on a conference panel with Gercke, said that as he listened to Gercke speak, he couldn't help but think of his own son, who is graduating college this year. The young man, with Maiuri's encouragement, learned about both coding and finance.

Asset managers who can't write code have just a 50 percent chance of surviving in the industry.

"I said to him, 'You're going to walk into an investment bank or an asset manager and you'll be in a position where you can understand the business, the operating model, and the technology,'" Maiuri remembered. "'You can provide solutions.'"

But while Maiuri's son may be a problem-solver of the future, Maiuri and those working for him are trying to deliver new solutions right now. Maiuri recalled how, not long ago, one of his traders approached him with an interesting proposition.

"He said, 'Listen, I think I can get rid of my job. I can write algorithms and I can write a framework that basically does this more digitally,'" Maiuri said. The trader happened to know the programming language Python and used it to develop a single application to source and price stocks for clients - a task that used to require working with multiple tools.

He's now bringing that type of innovation to life across the company.

"He's able to build prototypes and clearly articulate to the engineering teams what has to be done and how it has to work because he understands both sides of it," Maiuri said. "There's just not a lot of people who can do that."

As much promise as code-savvy traders and new technology hold for the financial sector, the speed of technological advancements do give some financial professionals pause. If technology keeps progressing at such a rapid pace, many have wondered, will computers someday be "smart" enough to supplant the jobs of asset managers themselves? Will artificial intelligence and algorithms run all portfolios, no human intervention required? Recent years, after all, have seen the rise of low-cost robo-advisers—brokerage firms that use algorithms to design and manage clients' portfolios, providing investors with little or no human contact.

Maiuri doesn't see human brokers becoming totally obsolete in the near future, noting that the skill of a trader depends in part on understanding how emotion affects the markets—something that machines can't do yet. Gercke, meanwhile, has argued that the potential that machines will someday replace the traditional role of asset managers is yet another reason to learn how to code. Machines can't "learn" to trade without a human programming them.

"You have to teach that artificial intelligence," he said, "and only people who code can do that."

Topics: Innovation , Advanced Technology , Training

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