If you used your credit card to buy a coffee in Montreal, and a minute later to buy three dishwashers in Shanghai, that transaction would most likely be blocked. This is thanks to fraud-detecting machines put in place to protect both customers and institutions – in other words, the application of modern-day artificial intelligence (AI).
While AI is often discussed as a new phenomenon, it began long before 2018, says Chadi Habib, executive vice-president of information technology at Desjardins Group. Mr. Habib was part of a four-person panel speaking on the ethics of AI and fintech at the Advocis Financial Symposium held in Toronto in November.
“Many of the techniques of machine learning, such as looking for patterns and analyzing information, have been used for a while in compliance, anti-money laundering and fraud detection,” he says. “What interests us now is how we can use AI responsibly to drive value to our members and customers.”
As publicly traded financial institutions report significant investments in technology and continue to ramp up spending, advisors are becoming increasingly interested in how emerging technologies with artificial intelligence applications can enhance their businesses.
According to November reports from research firm Venture Scanner, a total of $188-billion was invested in the broad categories of AI, fintech and insure-tech in the past quarter alone.
“Obviously, no senior officer or board member would support these levels of spending without a reasonable expectation of increased shareholder value resulting from the investment,” says Curtis Findlay, president of Compfin Management and chair of the Advocis technology task force.
“Very few variables in our industry are not being automated already. Technology has many advantages – it can provide better quality control and reduce the costs of administrative activities such as record keeping, case preparation and note taking. By increasing efficiency, it can improve access to advice for potential clients who may not otherwise receive it.”
Mr. Habib suggests current technologies can also help advisors go a step beyond in supporting clients’ financial health over their lifetime by predicting and preparing for major life events.
“Historically, my advisor might talk to me about putting money in an RRSP and what a mutual fund would look like. Frankly, most consumers don’t think that way. I haven’t met anybody who stays awake at night analyzing the terms and conditions of their mutual funds.
“People dream of acquiring property or having enough money for retirement. As a new parent, I’d like our newborn baby to be able to attend any school he wants in 18 years. So what’s the path to get us there?” he asks.
“That conversation has to start with the life event rather than pushing financial products. Our industry has not always done it that way.”
Despite fears that AI will lead to the automation of all exchanges, Mr. Habib believes there will always be a need for meaningful human interaction.
“We do not believe in 100-per-cent virtual advice. There are moments in our lives where it’s critical to interact with a human being, like when you’re buying a home for the first time, but clients want that to happen on their own terms.
“Maybe they don’t want to be forced to come to your office and sit beside you. Maybe they’re going to want to meet at a coffee shop or university campus or use video-conferencing solutions like Skype.”
On the flip side, Mr. Habib urges advisors not to subscribe to the myth that older demographics cannot go digital.
“Some of our earliest adopters are over age 65,” he says. “Baby boomers can be as digital as everybody else, but accompanying them in this transition is vital.
“As a member-driven co-operative, part of our role is to work with our members in taking advantage of our digital offerings. Walk into any of our branches and someone will show you how to make a payment with your mobile phone or renew a mortgage online. We offer clients online tutorials or the ability to call any of our call centres who will walk you through the process.”
Rather than assuming their clients will never embrace emerging technologies, advisors must consider how mass acceptance occurs only after the device becomes reliable, Mr. Findlay says.
“Those clients you doubt will embrace the new technology may have driven to your office using navigation software in their hybrid cars. When navigation equipment was first introduced, we often found it to be incorrect and difficult to trust, but now most people use navigation in their car system or phone quite regularly,” he says.
“How long will it be until you are hearing your clients ask if you offer wearable financial monitoring devices? Whether you utilize facial recognition software for risk-tolerance assessment, or perhaps client DIY voice-activated retirement planning software?
“All of these are either available today or being tested in labs right now.”
However, advisors should exercise caution. Mr. Findlay gives the example of a patient walking into an optometrist’s office to get their eyes tested. Although their eyeglasses prescription can be determined by a digital assessment, they still undergo a traditional eye exam to ensure the doctor’s professional opinion is in accordance with it.
“For example, if I use a tool that measures risk tolerance, until I know with certainty that the device is perfected, I should continue to use the ‘know your client’ questionnaire to confirm the client’s risk level,” he says. “Over time, new technologies will be more fully adopted by compliance departments once they become proven.”
In the same vein, Mr. Findlay suggests that advisors open an account themselves to undergo the client experience prior to forwarding anyone to them. "This would assist the advisor in testing the algorithms and embedded conflicts that may impact the recommendations made to clients.”
In the end, the winners of the technology race will not be whoever creates the best technology, says Mr. Findlay. Instead, they’ll be “financial companies and advisors who can combine artificial intelligence applications with reliable, accurate historical data and resourceful intellectual capital. They’ll be the ones who are able to create a culture that absorbs change rapidly.”