Are machines superior to man? It’s a recurring nightmare to think a bot could do it better than you can, right? That doesn’t seem to be the case anymore. It’s understandable that we fear the unknown and adopt a dramatic idea of what AI is – the horror story, typically perpetuated in the media. But minds and times have changed. Robo-advisory and AI is becoming the new norm in asset management and customer service.
2018 should be given a new moniker: ‘The Year of Regulatory Change’ (because so many have been introduced and rolled out within the financial sector!) These new requirements have also been synonymous with integrating AI and automated software. The reception has been ambivalent (larger firms being forced to evolve their business models and invest in training for their personnel) but the key USP has been how advanced FinTech will improve asset management processes with accuracy, transparency, and efficiency.
The USA is AI-OK!
According to the market intelligence of Fannie Mae, mortgage lenders have welcomed AI solutions with open arms on the other side of the Pond. In a recent survey, the results revealed that 40% of mortgage banks have implemented automated systems to reduce the time-consuming, administrative functions, as well as using AI algorithms to anticipate client behaviour and prevent fraudulent activity.
Brokerage firms, ranging from startups to Charles Schwab, have also taken the AI leap by investing in robo-advisory in a client-facing capacity. This has proved to be a cost-effective decision, which includes the use of beneficial algorithms that can determine the following:
- Consider individual client preferences
- Manage and split assets between different types, like stocks or bonds
- Analyse the level of risk involved
- Rebalance portfolios
- Prompt asset managers to contact their clients
Don’t forget about that rich and important data. Due to the surge of data that has been made available to FIs over the past decade, it’s practically impossible for firms to process all of it manually at the rate that’s required. This is where machines get the chance to steal the spotlight to shine with their data science capabilities. From machine learning to Natural Language Processing (NLP), AI can identify insights that are valuable to asset management firms. Organisations like Bloomberg, FactSet, and Thomson Reuters have already integrated these tools based on these plus points.
The Good, the Bad and the Unknown
So, what has been holding us back about AI and robo-advisory? The fear of the ‘Uncanny Valley’? The inevitable ‘rise of the machines’? Debilitating cyberattacks bringing the global economy crashing down? It’s important to take worst-case-scenarios into consideration (hello, Hard Brexit) but we should also acknowledge the positives, which tend to be overlooked and are left floating somewhere in limbo.
What about the long-term benefits, such as absorbing AI systems into the core budget, outsourcing where necessary, and saving time on daily calculations, monitoring, and reporting? Recognising the advantages of automated platforms and not seeing technology as a takeover was the topic of conversion with Ruffer LLP’s Technology Lead and Business Analyst, Frederic Lalande. There’s room for asset managers and financial institutions to maintain the human touch, whilst reaping the rewards of FinTech at the same time.
To echo this perspective are the findings from the latest Genesys survey, showing a positive point-of-view to robo-advisory alternatives. Here, we are presented with another view that supports a human-AI status quo emerging supreme:
- 71% say a human is needed
- 76% support digital channels
Ultimately, FIs can combine human and AI advisors to keep clients informed and up-to-date, providing them with an efficient service they expect. However, to keep consumers consuming, financial firms must understand where the happy medium exists between digital and human involvement for a fortuitous future.