AI advisers can replace humans, says Chinese firm

The CEO of Polaris argues artificial intelligence will replace human advisers in financial planning, breaking from the consensus view that a hybrid model will prevail.
AI advisers can replace humans, says Chinese firm

Artificial intelligence (AI) could one day take completely over the role of the human financial adviser, predicts a digital wealth industry expert from China, breaking with the general consensus that a combination of man and machine will end up serving clients. 

"In 20 years, people will become much more comfortable with the idea of receiving financial advice from fully automated advisers,” Zheng Yudong, CEO of Chinese digital wealth management and robo advisory firm Polaris, which is a wholly owned subsidiary of fintech firm Pintec, told AsianInvestor.

He believes technology will change the very nature of financial advice, especially when it comes to offering typical financial planning services.

Currently most investors don’t trust robots to understand their specific financial needs, but Zheng believes evolving changes in the world of AI and machine learning will help technology eventually understand the “human/emotional” component involved in declsion-making and overcome that challenge.

AI is an area of computer science that aims to create 'intelligent' machines that work and react like humans.

Machine learning is closely related, and aims to get computers to react without being explicitly programmed. It is primarily responsible for the development of self-driving cars and practical speech recognition, to name two examples.

Zheng argued that all financial needs can be typically addressed by knowing the answers to three basic questions: the time period of the investment; return expectations and how an investor expects to receive the returns—as a lump sum or dividend.

“Whether it is retirement planning or education, all financial goals basically come down to these three questions."

He added that financial planning can be highly quantified and nearly everything can be calculated, enabling the use of algorithms and big data to understand client behaviour and provide client-specific advice.

“For example, if a customer overspends from his salary, the advice specific to him will be about helping him to save some money every month instead of spending it all," he pointed out.

AI: Future undecided

The future of AI remains controversial, with renowned tech leaders taking sharply contrasting views.

Tesla and SpaceX CEO Elon Musk has repeatedly said people need to more worried about the dangers of the increasing use of AI, according to a CNBC report in September.

Facebook’s co-founder Mark Zuckerberg, meanwhile, views AI far more favourably, believing it will usher in a slew of improvements for humankind.

In Asia, China is seen a key contender to become a leader in AI-driven technology, experts have told AsianInvestor previously.

Nevertheless, Zheng's view of the AI-led adviser is not widely shared among wealth industry experts in Asia.

“The combination of algorithms and human is the key to consistent success in wealth management,” Freddy Lim, co-founder and chief investment officer at StashAway, an online wealth platform that launched its services in July, told AsianInvestor.

Lim said that it is important for investors to adopt a systematic data driven approach, which can be done using a variety of data analytics techniques including AI and machine learning. But he added that the application of such techniques is likely to focus on providing more personalised financial advice, rather than having robots make investment decisions themselves.

“Without guidance from humans in setting the right objectives, priorities and boundaries, algorithms can run amok, When deployed properly, algorithms can automate tasks and replicate the thought processes of experienced fund managers with great consistency,” Lim added.

To algo or not

A white paper by investment management solutions provider SimCorp on the future of wealth management in the Asia Pacific also underlines the importance of transparency of digital advice models.

“Algorithm assumptions should be based on generally accepted investment theories, and a plain language description of assumptions should be available to investors,” it noted.

Liew Nam Soon, Asean financial services leader at consultancy EY, also believes the need for a human adviser will continue despite rapid advances in technology.

"When investing in more complex products such as structured products and private equity, human intervention will be needed,” he added.

Polaris’ Zheng acknowledged that fully automated solutions might not work for private banking clients looking for customised guidance and advice on matters such as estate planning, which is sensitive and private.

Polaris provides the technology for a newly launched robo advisory platform in Singapore called Pivot, which is partly backed by pan Asian life insurer FWD.

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