Robot revolution poised to wipe out millions of jobs - Bank of America

Robo-advisors using algorithm-based systems to provide financial advice to consumers will consign 25 million jobs in the financial and legal sector to the scrap heap over the next two decades says Bank of America, in a report which paints a bleak future for the human workforce as new robot workers transform the global economy.

The report says robots and other forms of artificial intelligence will take over 45% of all jobs in manufacturing and shave $9 trillion off labour costs within a decade, ushering in a new era of 'creative disruption'.

Billing the coming upheavals as a fourth industrial revolution, the authors say rapid advances in technology will cause a paradigm shift in the way society lives and works. “The pace of disruptive technological innovation has gone from linear to parabolic in recent years," states the report. "Penetration of robots and artificial intelligence has hit every industry sector, and has become an integral part of our daily lives.”

While much of the disruption will be felt at the bottom ends of the labour market, middle class jobs are also set to feel the pinch, says Bank of America, pointing to the growing use of robo-advisors in financial planning as a prime example.

The Millennial generation now 18-34 years old will be the first to switch en masse to these automated services, states the report. This rising cohort already holds $7 trillion of liquid assets and is likely to inherit another $30-$40 trillion from Baby Boom parents.

A new generation of wealth management firms such as Wealthfront, Betterment, Personal Capital, and FutureAdvisor are already luring away clients from the big banks with the promise of no-frills, low cost, advisory services. Around 60% of Bay Area-based Wealthfront's customers are under 35.

Many of the traditional wealth advisors are taking note, and Bank of America is no exception. The firm is understood to have put dozens of employees to work on an automated investment prototype for Merrill Edge, which targets accounts under $250,000, according to a recent Bloomberg report.

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Comments: (7)

A Finextra member 06 November, 2015, 14:18

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Maybe someone who develops the algoritms will become a CEO.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 November, 2015, 18:15

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Scary (for the workforce) but quite credible, considering algo trading already accounts for 60% of stock trading in the USA (according to Michael Lewis's latest book Flash Boys).

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A Finextra member 06 November, 2015, 19:23

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This seems to be a broad report. Cognitive computing (Watson) will transform industries. But, it is early to know where and how much. This speaks of job losses, but we have seen through expereince that today with all the automation we have in place already, we employ more people than ever before.

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A Finextra member 09 November, 2015, 15:54

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Actually the statistics show that we have about the same amount of people working as there were before the recession hit, but many more of them are working part-time. There are many work hours lost and wages at the lower end have largely stagnated.

However I am not sure we can correlate this with the additional automation or if it is a result of a flat economy.

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A Finextra member 09 November, 2015, 17:09

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My point was not about recent employment but over the longer term. Automation of the 1960'a, 70's 80's and 90's eliminated many jobs. But the number of people employed todays (2000's) is greater than the number employed before. So, while jobs will be eliminated, others will be created.

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Gerard Hergenroeder - Payments Shark - Millersvile 09 November, 2015, 20:27

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I can see a big reduction in overall staff. But, it will come from a number of different things. The first will be the fact that people are not going to branches. I envision a 50% decrease in the number of branches in the next 10 years. The second is substantial productivity improvements caused by new technologies. For example, I envision substantial consolidation from a processing and an operations in the area of payments. If banks were to architect their payments today, they would look much different than today's systems. Predictive analytics will enable a much smarter bank which will improve overall productivity and provide a higher level of productivity. The apllications themselves will materailly change how business is conducted especially as the industry takes advantage of shared ledger technology. All in all it is not one thing that will drive bank productivity. Robtics is just one of many things. I think the projections that were cited are quiet lofty.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 10 November, 2015, 11:38

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As I write this comment, I'm staring out of my office window at a construction site where a 20 storey building is coming up. I see one crane and barely 10 laborers. 10 years ago, a similar site would've been swarming with at least 150-200 laborers. That said, I'm sure the crane manufacturer employs more people today than it did 10 years ago. So, while there's a reduction in manpower in the construction industry, there's an increase in manpower in the heavy engineering industry. Likewise, due to the factors mentioned in the article and comments, there's bound to be a reduction of manpower in the financial services industry but also an increase of manpower in the tech industry that increasingly powers it.

But this logic applies only in the developed world. In emerging markets - like India - new customers are being added to the banking system every day. While an old bank customer - like me - rarely visits a branch, new bank customers seem to first want to use branches before ever going digital, so the number of branches is increasing at a rapid clip and, along with that, so is manpower in the banking industry.