While many have predicted that artificial intelligence could change how financial services operate, Kidbrooke notes that the revolution has yet to manifest. Could Covid-19 change that?
Despite repeated predictions that AI and robotics will transform society, many things are still like they were a decade ago. Sure, we now all have small mobile computers in our pockets and can do everything from ordering food to boost our dating lives through a few simple swipes on our phablets. However, as WealthTech100 startup Kidbrooke notes in a new blog, wealth management is still pretty much the same as it was ten years ago.
The argument goes that even though robo-advisory services and platforms have become ubiquitous and successfully lowered the entry for both discretionary wealth management and execution-only products, the “core advice space remains largely untouched.”
“Those specifically requiring financial advice continue to be offered a papered, human intermediated service that would look very similar now as it did a decade or more ago,” Kidbrooke suggests, echoing Embark Group CEO Phil Smith who recently suggested that robo advisers are still stuck in the stone age.
Kidbrooke explains that part of the reason for this sluggishness to adopt new digital technologies in the wealth management space is due to the people who use the services. These people are usually a bit older and, while adapt at using smartphones and other modern tools, are not in the habit of “using digital services for a critical service provision.”
A second reason for the sector’s sluggishness is due to the complexity of the regulations governing the industry. “[Firms] have struggled to get their heads around on how to build compliant and profitable digital advice solutions,” writes Kidbrooke. “Sadly, this reality has led to most high-quality advisory firms raise rather than lower their thresholds. This leaves paltry options for those seeking advice on the lower end of the wealth scale.”
That being said, Kidbrooke suggests that Covid-19 could act as a catalyst to speed up the implementation of new tech in the sector. “The next generation of tools and services in the wealth space will be equipped to meet different challenges,” Kidbrooke suggests “Cost control is an inexorable battle in the race to serve the underserved in the advice space. One doesn’t need to be a business model visionary to realise that automation significantly lowers costs, thereby supporting greater inclusion.
“Technology can fundamentally solve more complex problems now than even just a few years ago. Progress in fields such as natural language processing (NLP) are vital in bridging the gap to further operational robotisation. An era of genuine robo-advise could be about to dawn.”
That being said, Kidbrooke added that there will still be a place for human beings in a more digitalised industry. “The art in delivering the next phase of wealth journeys will be to elegantly knit together man and machine in order to create a new generation of products,” the firm says. “These can solve the inclusion, engagement and outcome orientated problems that continue to build in incumbent verticals.
“In the short and medium-term consumers are very unlikely to see a pure robo-solution as being sufficient for their needs. Firms must recognise the emerging dichotomy of humans concentrating more on the empathetic and emotional engagement needed, whilst accepting that machines can broadly do a better job of the heavy-lifting.”
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