Can technology break beyond investment management?

Artificial intelligence might eventually give flesh-and-blood FAs a run for their money

Can technology break beyond investment management?
There are two prevailing perspectives in the financial services industry when it comes to technology. One sees it as a threat, while the other sees it as a tool to serve clients. Whatever the truth is, computer experts agree that improvements in technology will help the industry, if not the advisors that work in it.

“Definitely all the big banks are very excited about AI [artificial intelligence],” Stephen Piron, co-founder of Toronto-based tech firm told the Globe and Mail.

One of the biggest applications of AI for financial firms is in leveraging big data. “On trading desks, this sort of thing is a little bit old hat,” Piron said, referring to the use of big data in institutional-level trading. “Now it’s moving down to the more retail banking stuff and it is all about helping businesses understand their customers better.”

Robo-advisors have also been gaining significant traction on the wealth management side, but it’s still in early stages. According to Davyde Wachell, CEO of Responsive AI in Vancouver, the industry is currently profit-oriented rather than geared toward finding the best strategy for individual consumers. This has led to low-cost alternatives such as robo-advisors — which are only the first step.

“The next stage is financial planning that is driven by context and having goal-based systems,” said Wachell, whose firm offers robo-advisor services as well as wealth management AI software for independent wealth management outfits.

AI has the potential to go beyond know-your-client intake forms. Software is being developed to use data from social media, spending history, past investment decisions, and a variety of other sources to find patterns and generate a tailored financial plan and investment strategy.

The technology could also help financial advisors by taking on grunt work like back-end office and compliance-related tasks. “We’re automating a lot of processes, getting rid of the paper cuts for advisors and making it easy to keep on side with compliance,” Wachell said.

At present, AI is used to sift through mountains of data — news stories, financial reports, economic outlooks, and so on — to evaluate securities and markets. When it comes to things like making judgment calls, flesh-and-blood advisors and managers are still leagues ahead.

But major Canadian banks are planting the seeds for an AI-based financial industry. The Royal Bank of Canada has put tens of millions of dollars in AI research and development, including studies in deep learning pioneered in Canada by Professor Geoffrey Hinton at the University of Toronto.

Deep learning, a subset of machine learning, attempts to mimic the brain’s construction of neural networks. Technology that incorporates this type of programming has the potential to learn, and therefore become more valuable, over time.

“You can get a computer to truly understand what people want and need at scale – a personalized level,” said Gabriel Woo, vice president of innovation at RBC.

However, that lies in the distant future. For now, AI will most likely remain a powerful tool to help advisors understand clients better and create more nuanced portfolios for investors.

“AI would help people become more effective at what they do, but it wouldn’t actually on its own do things it’s not instructed to do,” Woo said.

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