Management Strategies

11:55 AM
Byl Cameron
Byl Cameron
Commentary
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Is There a Watson in Your Financial Future?

How artificial intelligence might affect financial services.

Imagine overhearing this conversation between a financial advisor and his long-standing client:

Client: “John, I have to tell you that Jane and I have come to a crossroads and it’s not looking good for us, even after 33 years.”
Advisor: “Oh, Chuck, I didn’t know. Thanks for telling me. Is there any hope of getting things back on the track between you two?”
Client: “No, this is the end game. We need to think through scenarios. She’s talking to her advisor about the same thing. We’re both committed not to make a circus out of this and to be fair to each other.”
Advisor: “OK. Well, thanks for telling me about this. So, let’s see what we can think through in light of this…”

Now re-imagine this same conversation between an automated or robotic financial advisor and its client.  It might go something like this: 

Client: “Chip, I have to tell you that Jane and I have come to a crossroads and it’s not looking good for us, even after 33 years.”
Advisor: “Have you and Jane chosen which way to go after 33 years at this location?”
Client: “No, Chip, that’s not what… Never mind. What I am saying is that this is the end game, a divorce.  We need to think through scenarios. She’s talking to her advisor about the same thing. We’re both committed not to make a circus out of this and to be fair to each other.”
Advisor: “I am sorry to hear of your divorce. I was not aware that a circus was an asset you had considered. It should be easy to avoid that.”
Client: “No, that’s not what I am saying, Chip. I am getting divorced and I need you to compute scenarios of how to divide our assets in a way that is fair to both me and my soon-to-be ex-wife, Jane.”
Advisor: “I understand. Computations are commencing.”

It’s easy to see the difference between the two exchanges -- the terminology and conversation sub-texts that the automated advisor simply can’t process. But stilted conversation aside, the fact that the advisor is basically a computer doesn’t necessarily mean it would be less effective at advising the client on how to invest his money. If fact, it’s possible the “robot advisor” could do a better job than its human counterpart.  

But why do we have to imagine a robotic advisor in the first place? Because IBM already has, and its name is "Watson." IBM Watson is a cognitive computer that made its splash on the public stage by competing against humans on Jeopardy in 2011. While Watson did very well against human opponents on the show, it did make gaffes, which illustrated that work had yet to be done before Watson could emulate the human mind. Since that time, Watson has continued to evolve and improve. Now the next frontier is to have Watson move into the act of providing financial advice to clients. In the era of big data, Watson has the capability of building a profile of a client and offering advice that is empirical, useful, and at least as good as what would be offered by a human. And Watson is never selling for commission.

If the financial adviser role is getting automated, what will be next? According to McKinsey & Company, the back office is already under a digital transformation whereby decisions could soon be human-free in the near future. But some other interesting trends point out that the need for human interaction may not disappear everywhere in financial services. Consider the case of TurboTax. Since its launch, many people have chosen to do their taxes with the help of this program. Despite this, the number of people who choose to do their taxes with the help of a human preparer has held steady at around 56%. It appears some roles are ripe for full automation; others will only replace humans by a slight percentage. 

Could the role of a company’s CEO be managed through a cognitive computer? 
Maybe. Before this century completes, we may see massive re-orgs in computer-run companies that once again couples tech with ops because the cognitive-mind CEO determined there were new synergies that weren’t realized the last time this was done, all without the involvement of a human decision-maker.

Could a fully automated enterprise exist some day? 
At the very least, we are now seeing that this is a real possibility. But would such an enterprise be one that is “better” in meaningful way? Humans are concerned with results. Computers can certainly give those, and in a way that reduces error and does not have an agenda other than the clients’ outcomes. With that said, humans understand humans best, based upon shared experiences. Empathy is not something that can be automated. And empathy is what allows us to confide our dreams, or tragedies, in a way that helps us depict our future, financial and otherwise. In short, automation for automation's sake may not always be the best way to evolve. 

Like everything else in technology, time provides the best insights. On the questions of robotic financial services and its best applications, we can say definitively that time will tell.

Byl Cameron is the Digital Practice Lead for Carlisle & Gallagher Consulting Group. A technology veteran of 20 years and a FinTech junkie for 17, his primary focus has been on digital development, mobile design, and e-commerce behind digital technology in the financial ... View Full Bio

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Nathan Golia
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Nathan Golia,
User Rank: Author
10/31/2014 | 3:17:58 PM
Very interesting
Insurance agents have long worried about disintermediation, but it's interesting to think that the "agent" might stick around as some sort of AI. Granted, a lot of the agent value proposition is in the "human touch," but if even that can be programmed, what's off the table?
TomVignard
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TomVignard,
User Rank: Apprentice
10/30/2014 | 5:03:41 PM
AI in financial compliance?
Great article.

Being a product manager for compliance communication monitoring application using Artificial Intelligence, I am very excited about this and I believe that Watson is just the begining on rototic and AI in companies, even beyond the financial industry.

However, I think Byl makes a critical point highlighting that 'Humans understand humans best'! For me this is the bottom line. Humans are irreplaceable and technologies must be used only to assist human and companieswhere it makes sense.

 
Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
10/30/2014 | 8:01:57 AM
Re: Multi-channel future?
It's true that nothing will ever replace the value of a face-to-face relationship, where you shake hands with your advisor. But, as you point out, virtual video sessions on an iPad, laptop, mobile device or computer will certainly be in the mix. And they will be a powerful tool for agents and advisors going forward. I've only had a few video interactions with CSRs, and the experience is quite good.
Kelly22
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Kelly22,
User Rank: Author
10/29/2014 | 4:28:07 PM
Re: Multi-channel future?
Interesting point, Kathy. I'm not sure we'll ever see the demand for human interaction completely go away, but I agree that it will certainly change the more technology evolves. Customers that don't want to interact with a robot could easily prefer an in-person conversation supplemented by mobile tools, gamification, etc.  
bylcameron
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bylcameron,
User Rank: Apprentice
10/29/2014 | 11:31:46 AM
Re: Multi-channel future?
Katherine, thanks!  This is definitely an interesting observation - humans may not entirely go away, but they will certainly find their business value to be more "hybridized" with the tools on their devices, likely a tablet in many cases. 
Byurcan
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Byurcan,
User Rank: Author
10/29/2014 | 11:31:13 AM
Re: AI
You may very well be right! There'll definitely be a lot of changes in the way we interact with technology over the next 20 years.
KBurger
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KBurger,
User Rank: Author
10/29/2014 | 11:27:11 AM
Multi-channel future?
Very thought-provoking, Byl. The insurance industry has been grappling with this issue for years as the shift to multi-channel distribution and emergence of digital interaction platforms accelerates. Where does the agent fit in? How much should be invested in the agent channel as opposed to other distribution channels? What kinds of technologies do agents need to be effective and successful? And to what extent to customers and prospects prefer self-service/digital interactions vs dealing with a live person? I don't think insurers have completely figured this out yet. But it is clear that to the extent the "live person" channel survives, it will function very differently and will also rely on tools such as AI, modeling, gamification, etc., to provide a richer and more accurate experience to customers.
bylcameron
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bylcameron,
User Rank: Apprentice
10/29/2014 | 10:17:30 AM
Re: AI
You're right, Bryan.  It's going to happen.  In a way, with the calculators and decisioning engines that most financial services public websites today, it's already there. 

As and when it's with a robot across from the desk with whom the client would have to make eye contact - that will be a threshold that will really change things.  I believe that is not more than one more generation out.
Byurcan
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Byurcan,
User Rank: Author
10/29/2014 | 10:07:32 AM
AI
Interesting post, Byl. As you humorously note, AI has made a lot of strides, but still fails in detecting the nuance in human language often. However, as technology continues to improve, it';s definitely not hard to imagine AI suvccessfully performing the role of financial advisor in coming years.
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