Is the Research Department in Financial Firms on the Chopping Block? And, What about Low-Value Tasks in Legal Sector?

 Yet another niche expertise which is threatened by AI could be the role of the research analyst in those prominent financial firms. The Financial Times takes a look at the possibility that those businesses will gut the whole department and operate with a few star analysts. 

The reality is that large language models perform well in interpreting patterns. Much of the performance of corporations follows a pattern. There are few surprises. Profits generate more profits. Subpar results tend to continue doing that. 

The brains at the University of Chicago, reports the Financial Times, did some research with AI. What they found is:

"These outperformed median estimates when compared with those of analysts ... LLMs generate insights by understanding the narrative of the earnings release, as they do not have what we may call numerical reasoning — the edge of a narrowly trained algorithm. And their forecasts improve when instructed to mirror the steps that a senior analyst does."

However, currently AI has limitations. It can't predict the next big such as which enterprise will dominate AI or global developments such as an unexpected boom. Usually that's the role of a star analyst. 

So, one scenario can be: A small research function and several star seers. 

Another could be that financial firms stick with the status quo. They'll continue to hire a bunch of junior analysts, hoping that some will develop into stars which shape the organization's brand and develop new business. 

The star model dominates professional services, beyond finance. For example, both the branding and piling up new assignments in large law firms such as Kirkland & Ellis, Simpson and Paul Weiss depend on the stars. 

In the current war to access those stars, to poach them from other firms, Big Law is willing to pony up $20 million per year, often with multiple year guarantees. That's a lot of money. To keep the Profits Per Equity Partner machine generating that level of financial results what could be on the chopping block are the roles of many of those who implement the stars' strategies. That is, the junior lawyers.

Eventually some of those tasks could be performed by AI. This year, reports LinkedIn, sectors will test out the real world applicability of AI in everything from strategy to operations. The legal sector could uncover the utility of a number of applications. However, with the lucrative practice of M&A on an uptick this year, it'll probably be all-hands-on-deck. Junior jobs will be safe in 2025. 

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