Why the best investment advice also needs a human touch

Asia’s tech-savvy financial experts are world leaders in adopting fintech solutions but for superior investment advice, clients are looking for human intelligence, coupled with machine learning.
Why the best investment advice also needs a human touch

Fintech is changing the landscape of investment management. In 2017, global funding for the sector was estimated to be around $31 billion, a more than tenfold increase from $2.8 billion five years earlier, according to KPMG’s Pulse of Fintech report.

While the US attracts most investment (nearly half of the global total in 2017), China is the largest consumer market for fintech services including digital payments and online lending, and it is also home to some of the world’s biggest fintech firms, by value.

Nick Pollard

Although the term fintech is very broad, Nick Pollard, managing director, Asia Pacific, CFA Institute said, at its heart, it is still technologies applied in the financial services sector. “Fintech has emerged as a powerful disruptor. It is rapidly transforming the real economy and the financial sector at a global level, while also delivering reforms and sustainable development.”

According to Google Trends, current global interest in fintech is 10 times as high as it was three years ago.

“CFA Institute sees three different paths to fintech development: start-ups going it alone, financial institutions collaborating with technology innovators, and financial institutions building technology in-house. Although we believe the second path will likely dominate in the future, there will be winners from alternative paths,” Pollard said.


In the report published by CFA Institute, FinTech 2018: The Asia Pacific Edition, it reveals many industry experts see fintech as built on four key pillars: artificial intelligence (AI), blockchain, cloud computing, and big data.

The digitisation of data means easy storage and transmission and, more importantly, quicker searching, processing, and analysis of information.

Larry Cao

“Big data technology has become an integral part of the financial services industry that can generate new revenue streams through personalised recommendations and better service to customers,” said Larry Cao, director, Industry Research, CFA Institute. “For example, in January 2019, State Street Global Advisors reported that its data, as a service platform, had clients in Australia and Japan, and that the Asia Pacific region was the first location in which it used its data capabilities for asset owners.”

“We all know global players like Google and Microsoft, but there are a rising number of providers headquartered in the Asia Pacific region. These cloud service companies are reducing the barrier for some young financial services companies, who can cloud services rather than build their own IT infrastructure,” Cao said.

Relative to big data and cloud computing, blockchain is still at an early stage of development. Blockchain identifies and tracks of financial transactions digitally and shares this information across a network of computers. The network is referred to as a distributed ledger. Because it is shared by several parties, it means greater transparency and security for everyone involved.

And finally, the adoption of AI is enabling areas such as credit analysis and fraud detection, which are critical for financial investment decisions.

Within this bucket falls the concept of a robo-advisor. Essentially, an algorithm-based investment service, robo-advisory is expanding in the wealth management field. A February 2019 report by PricewaterhouseCoopers, reveals robo-advisers are likely to become more popular in Asia than in the US or Europe because of the region's younger and more technology-savvy population. Robo-advisory services are currently available in mainland China, Hong Kong, Malaysia and Singapore.


Do robo-advisors or advancements in fintech need to be feared? Cao said it’s not a race between humans and machines. It is about humans plus machines. “We want the smartest machines working for us, and our best chance of building them faster is to work with the best in AI. The optimal way forward for fintech is likely to be through the collaboration of powerful financial institutions and technology innovators.”

AI's advantage is in standardised and repetitive tasks. In the near future, analysts will likely free themselves from such mundane chores as building basic financial models. Insights, rather than Excel skills, will rule the day. It will be an iterative process: analysts will help build intelligent systems to process more information to help analysts generate better insights.


“This, of course, means that financial professionals need to be at the top of their game, so they can help build and code intelligent systems,” Pollard said. “I believe the investment firms who will win in the future will be those that employ both human intelligence and artificial intelligence. It is clear that the winners in the financial markets of tomorrow will be those that embrace fintech today,” Pollard concluded.

As a leading financial accreditation organization, one of the key focuses is educating members and students about fintech innovations through published research and papers. Fintech is now an important element of the CFA® program exam.

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