There’s no doubt technology is revolutionising finance, but while there are some fears about the rise of artificial intelligence, it’s likely that humans will always play an important role when it comes to managing investments.
Over the past 50 years, technology and finance have gone hand in hand. Since On the Buses actor Reg Varney became the first person to use an ATM in 19671, technological advances have made managing money and making payments easier than ever.
Bank customers have gone from having to visit a branch to being able to manage their finances online – and can now do it on the move, thanks to banking apps. And you no longer have to carry cash – simply tap your contactless card, phone or smartwatch and you’re all done.
Likewise, the internet has made investing easier than ever. There are now websites and apps that allow you to invest within an ISA. And, should you choose to, in complex alternative investments such as foreign exchange, commodities and even the new breed of cryptocurrencies.
All of this doesn’t come without concerns, however. Some people aren’t necessarily at ease with the rise of technology and automation. Some prefer face-to-face contact, while others are worried about the rise of algorithms and artificial intelligence (AI) making decisions about how their money is invested.
One factor that could be driving these concerns is a fear around the loss of jobs to AI and robots. According to a 2017 survey by PwC2, up to around 30% of existing UK jobs will be susceptible to automation from robotics and AI by the early 2030s.
This is something that’s been felt in the wealth management industry. Statistics about financial services estimate that 30% of jobs will be under threat over the next decade due to disruptive tech such as AI, robotics and blockchain3.
But maybe at this point, it’s worth pausing to see how investors might be affected by the rise in AI.
The human element
First, there are many sensible arguments in support of AI and state-of-the-art technology. Not only can it make accessing financial services far more flexible, it’s also helping to reduce costs4 – making investing an option for a wider group of investors.
What’s more, while there’s a perception that all robo-investment platforms are faceless, that’s not actually the case. While there are ‘robo-advisers’ driven purely by algorithms, there are others that have a very human element.
Take, for instance, the Chief Investment Office (CIO) at UBS, which oversees the asset allocation into all of the UBS SmartWealth funds. The CIO is home to 900 investment managers who select and monitor all securities that go into our funds, bringing their considerable experience to bear over all investment decisions.
This brings together the best of both worlds – using technology to analyse clients’ personal investment circumstances and then recommend a suitable investment strategy, yet relying on human investment experts to make the underlying investment decisions.
Why is this human element a good thing? As Jean Lin, the Global CEO of global digital agency Isobar noted in the firm’s Augmented Humanity: Isobar Trends Report 20185: “Artificial intelligence is great, but humans score on emotional intelligence. The power of being human is in empathy. This cannot be automated or outsourced.”
A well-documented advantage of robo-advisers is that they’re completely scalable – they can take on as many clients as possible because algorithms are making all the decisions. Yet the same can also be said for platforms that have investment experts ‘driving’ the decision-making.
This is because they’re deciding which investments go into a set number of portfolios with specific investment goals. As long as you have a large enough team making those decisions, you can bring on board as many clients as you wish, who will all benefit from the expertise they bring.
We think that this is a more attractive model than letting technology do everything, because it includes the vital oversight and due diligence that the managers at the CIO bring to bear.
While fully understanding the concerns that some people may have, we believe the rise in AI and technology is an exciting development. It seems that investors are spoiled for choice and will be able to find a method of investing that suits them best. Naturally, it’s hard to predict where technology will take us in the coming years, but it’s certainly worth looking ahead with optimism rather than fear.
About the author
Shane is passionate about intrapreneurship, technology, customer experience and business innovation. He is one of two business leads of UBS SmartWealth and has been driving the innovation around the platform from the initial idea.
Shane is an experienced technology and business leader using technology to create business value and customer satisfaction through transformational innovation. With 20 years of experience and after joining UBS in 2006 Shane has played a significant role in key innovation and transformation projects within the bank. He is also involved in the Blockchain innovation lab in Canary Wharf, driving wealth management use cases and supporting experiments to push the boundaries of this nascent technology.
Before joining UBS, Shane occupied development and consultancy roles at the Dutch bank ABN AMRO and at Ford Motor Company. Shane holds a Master’s degree in Electronics and Electrical Engineering from the University of Manchester.
Shane Williams, Head of Operations, UBS SmartWealth
March 13th, 2018