CNBC recently looked at how firms ranging from big Wall Street institutions to Silicon Valley robo advisor start-ups are testing the waters to see how artificial intelligence can help consumers manage their money and plan for retirement; here are just some of its findings.


When The Dow Jones Industrial Average fell dramatically earlier this month clients of Morgan Stanley Wealth Management received a message from their financial advisor telling them exactly what happened in the market and what the firm’s investment professionals are saying about it.

It also told them their portfolio’s current probability of success in light of recent events.

The email may have been sent by a financial advisor, but behind the scenes, Morgan Stanley is just one of the firms experimenting with new technology and specifically how artificial intelligence (AI) can be applied to better manage clients’ money.

AI refers to the ability for computer science to replace human intelligence; financial firms ranging from Wall Street institutions to start up robo advisors are all investigating how tools such as algorithms, data mining and natural-language processing can help you become wealthier.

‘how tools such as algorithms, data mining and natural-language processing can help you become wealthier’

Called Next Best Action, Morgan Stanley formally launched its initiative by releasing its tools to its staff and more than 15,000 financial advisors earlier this year; the technology evaluates communications with clients by emails, texts and other notes and then applies machine learning to consider other ideas that can be suggested to the client.

This technique could be deployed in a whole range of different scenarios; for example it could be used to alert you if a stock you hold is downgraded.

A wider application could be to warn you if you live in the path of a coming storm, where it could be used to send you a list of helpful resources, information on your insurance rights and tips for protecting your pets.

Jeff McMillan, chief analytics and data officer at Morgan Stanley Wealth Management said: ‘The machine serves up those ideas to the financial advisor, and then they decide what makes sense based on their practice and the needs of the clients,’


Fast evolving natural-language technology is one way that artificial intelligence is being put to the test to handle human requests.

In just a few short years things have moved on a long way from asking Siri whether you’ll need an umbrella; the technology is now advancing to more complex questions to replace human interaction, providing conversational artificial intelligence to financial services firms.

This means that wealth management clients could be able to get more immediate response via mobile apps, websites or voice for routine requests, such as portfolio rebalancing or to buy or sell a stock.

Ram Menon, CEO of Silicon Valley start-up Avaamo told CNBC: ‘While there is a lot of talk about AI is going to change the world, and it is, a lot of the changes that are happening in the wealth management, retirement-planning market are tangible, practical and just making the whole velocity of interactions more efficient.’

‘there is a lot of talk about AI is going to change the world, and it is’

Elsewhere, companies are experimenting by using machine learning, where data is used to make predictions for the client; CNBC says that robo advisor Wealthfront has introduced a feature named Path, which uses third-party data and machine-learning answer questions such as when you can retire, how much you can afford to spend on a home and even where you can afford to live.

Kate Wauck, VP communications at Wealthfront said: ‘If you tell [Path] that you’re going to buy that $1.3 million condo in the East Village in five years, it can actually tell you, ‘That’s great. If you want to do that, it looks like you might have to retire a couple of years later or you could just save more. It’s not siloed advice. This is the power of automation.’


Man and machine


Automating processes can help enhance the work of human financial advisors or replace them altogether, depending on who you ask; Morgan Stanley believes the prompts advisors can send help to augment, not replace, their work.

‘The most powerful drivers of client satisfaction are in-person meetings and phone calls with our clients,’ said Mr McMillan.

Those in-person meetings, ‘face-to-face’ on this side of the Pond, may include discussing everything from investment options to more complex and wide-ranging scenarios, such as dealing with relatives in declining health or diagnosed with a disability.

McMillan says the technology Morgan Stanley is using solves two problems. It frees up financial advisors to have more in-depth conversations and allows them to reach more people faster; should the market crash, the machine allows advisors to efficiently message literally hundreds of clients at once.

‘Hey, we like the virtual assistant because it doesn’t lie’

There are also examples of where clients prefer automated systems over human interaction; Ram Menon cites an Asian financial services firm that deployed a virtual assistant to provide life insurance quotes and its clients actually preferred that form of contact:

‘The feedback was, ‘Hey, we like the virtual assistant because it doesn’t lie. It’s not trying to sell me something. It’s very factual,’ he said.

Wealthfront’s clients have an average age of 32 and the company is betting that they will prefer non-human contact: ‘We don’t call someone to really do anything anymore,’ Wauck told CNBC ‘That’s just an ingrained consumer preference.’


AI and the future of financial advice


The technology that powers the robo advisors has been around since the early 2000s and was first made available to the public when Betterment launched shortly after the financial crisis; ten years on, there are currently 100 firms offering robo advice worldwide and assets under management are forecast to hit $2 trillion by the end of 2020.

With the high cost of client acquisition just one factor, to date a hybrid model combining automated investment management and face-to-face interaction has arguably been the most successful; whether artificial intelligence will actually replace human financial advice depends on who you ask.

‘I think the technology is already there to replace the human,’ Menon told CNBC ‘It’s a question of adoption, as well as the seeming reluctance of the industry to let go.’

‘the technology is already there to replace the human’

Betterment currently uses artificial intelligence in a limited capacity to perform back-office tasks; however it does not use the technology to generate financial advice or manage portfolios, said Dan Egan the company’s, director of behavioural finance and investing: ‘Generally speaking, machine intelligence is kind of like an autistic savant, in that it will be very good at a very narrow, well-defined set of problems. It is not good at very open ended vague things with lots of different branches you can proceed down.’


Generally, it seems that AI has does not yet have sufficiently evolved ‘soft-skills’ to allow it to deal with some of the personality issues and the complexities and nuances of personal finance decisions.

However, as technology improves it is likely that AI will play an increasingly important role in managing our money – whether that is delivered directly or via an advisor who knits together all strands of your financial life, remains a moot point.

One thing for sure is that good data is crucial in understanding and interpreting our behaviour and for that reason some of the big players in tomorrow’s financial world could be the etailers and internet companies that have such unique access to our hearts and minds.



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