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Fin Tech – The New Frontier

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  • April 18, 2019
Fin Tech – The New Frontier

Remember Robo-Cop, the part-machine, part-man defender of justice that debuted in the 1980’s? Technology has come a long way since then, particularly when we consider the new Robo-Wealth Advisor.

While the Robo-Wealth Advisor may not be as exciting as the robots in science fiction movies, what they can do is revolutionary. The CFA institute says that these automated machines have the “ability to provide tailored, actionable advice to investors with greater ease of access and at lower cost”.  The Robo-Wealth Advisor can perform services like asset allocation, portfolio optimization, trade execution and rebalancing. We’re talking algorithms, data mining and natural-language processing, all with a goal of helping the investor become wealthier.

What does this look like? Well, last year when The Dow Jones Industrial Average shed more than 1,300 points, Morgan Stanley Wealth Management instantly sent out a message to tell its investors what happened in the market, what the firm’s investment professionals were saying about it and the probability of success based on investor portfolios’ in light of the current market events. To the investor, this information came from a Morgan Stanley financial advisor, but in actuality, it was Artificial Intelligence (AI) working behind the scenes.

This means that AI can potentially give investors access to real time insights into changing market circumstances. The benefits in this scenario include identifying adverse trends in advance, improved risk management and investment decision making, giving clients access to the same advanced stock selection and portfolio construction tools as the professionals.

While Fin Tech like AI seems to be the new frontier in the financial services industry, it’s not without its limitations. For one, there’s just not enough data. “A lot of time goes into writing code and tagging data for AI machines to process” says David Slatter, RF Investment Vice President. “When it comes to making a split second decision on a complicated deal, taking into account a variety of factors and an unpredictable market, AI won’t be able to do it. Not yet.”

So, how do we navigate through this new world of Fin Tech? Experts would say cautiously but with optimism. It is highly probable given its current capabilities, that in the near future, Fin Tech and automation will have an even greater impact on wealth management – an impact that could significantly benefit the investor.

 

References

https://www.cnbc.com/2018/10/19/-artificial-intelligence-is-changing-how-investors-money-is-managed.html

https://www.cfainstitute.org/membership/professional-development/refresher-readings/2019/fintech-investment-management



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