How AI is Disrupting Customer Service in the Financial Services Industry

Gavin Smith

Robo-advice and artificial intelligence technologies are fast-tracking new investment opportunities at a lower cost than traditional investment options – disrupting financial institutions’ approach to customer interaction.

These automated platforms, that use algorithms to manage investments at a lower cost than a financial advisor or active financial manager, are expected to grow significantly as an investment option. It is forecast that robo-advisors could manage around 10% of total global assets under management by 2020, according to a study by BI Intelligence.

According to Gavin Smith, head of Africa for deVere Acuma, an independent financial advisory firm, robo-advisors are also able to identify options based on an investor’s risk and return expectations, rebalancing portfolios when needed to meet the investor’s specified requirements.

“Algorithmic trading automatically, and immediately, adjusts to new developments. Theoretically, robo-advisors should be able to constantly act to perform according to an investment mandate.”

Smith says that robo-advice can lever real-time transaction analysis for stronger portfolio management, manage risk and detect fraud by an ad-hoc analysis on large volumes of disparate types of data.

Currently, the number of investment options using robo-advice is limited, although this is likely to change as it gains acceptance.

“There are many advantages to the introduction of robo-advisors and AI into the financial services sector,” Smith points out. “Lower compliance and regulatory costs help to bring down fees, speed up administration and save time.”

However, what they lack, is the ability to liaise with clients and understand the nuances of their requirements and changing circumstances.

Smith says that while they are providing innovative investment options, they lack newness when it comes to the big picture, that which financial advisors have.

“When it comes to understanding your goals, specific circumstances, and blending these with your retirement, tax and estate planning, robo-advisors are nowhere near to replacing good financial advice,” says Smith.

Keeping the opportunities and challenges that robo-advice offers in mind, some financial advisors are trying to marry the advantages of robo-advice and the financial advisory function.

“deVere’s Model Portfolio Service (MPS) range, for example, balances the cost efficient advantages of robo-advice with the common sense overlay of an actively-managed solution,” says Smith.

deVere, in association with Pacific Asset Management (PAM), launched MPS, a new model portfolio service comprising of only low-cost tracker and active funds.  It consists of a range of risk-targeted model portfolios to match individual client’s requirements.

Smith explains that by working with Pacific Asset Management, investors  can be given exposure to passive funds that matches their risk profile in combination with PAM’s ultra-modern range of multi-asset portfolios.

“In a world of ultra-low interest rates and the erosive effects of inflation, it is essential that we continue to offer our clients an extensive range of cost-efficient, highly diversified solutions in order that they reach, even exceed, their long-term financial objectives,” he adds.

The deVere MPS Range will initially consist of four risk targeted models and allow investors to gain exposure to the cost-efficient benefits of a passively run investment whilst also giving them access to a highly diversified actively-managed portfolio.

“Each model reflects a particular level of risk, they are highly liquid and invest across active, passive and smart-beta strategies,” says Smith. “But, there are many things artificial intelligence cannot do like adding that ‘the human touch’ much needed to provide an overall financial plan, guide tax, estate and insurance decisions as well as make the investment decision to put funds in particular robo-linked investments.”



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