In October last year, Thompson Reuters announced that they had entered into collaboration with IBM to deliver cognitive technology solutions to their clients by utilising the artificial intelligence (A.I) software known as IBM Watson. Up until then the legal industry was not known for its willingness to invest big money in speculative technology regardless of the potential for long term rewards. Now, in the legal world, A.I is the talk of the town.

However, while the use of A.I technology is still very much in the alpha testing phase in the legal industry it is already fully operational in the provision of financial products. For example, wealth management firm Charles Schwab recently launched a service called Schwab Intelligent Portfolios whereby an algorithm and not a person decides where to invest your money. A line of code will determine your risk appetite based on answers given to a short questionnaire. The algorithm will create a portfolio suited to your profile and manage it on a daily basis. The cost of this service is a fraction of what you would pay a wealth manager.

It is clear that AI is definitely disrupting the trading sector however what impact, if any, is it having on traditional banking services? In the below article Josh Sutton, global head of artificial intelligence practice at tech company Sapient, states that AI will be as disruptive in financial services as Uber has been in the taxi industry. He calls it the “Uber Effect”. Sutton believes that machine learning has reached a critical mass in terms of high performance at an affordable cost. He specifically identifies the retail banking sector as an area where AI will have the greatest impact.

Sutton maintains that a substantial amount of work which is done in financial services institutions’ middle and back office is “trainable” and is therefore likely to be replaced within the next decade. Employees working, for example, in operations should, like taxi drivers, think about upskilling, Fast!

However, those working in front office jobs whose role it is to build relationships, understand a client’s risk appetite and offer products based on that appetite are relatively safe… for now! AI will however, allow those working in front office jobs to operate more effectively. Indeed, a report published by Cognizant last year called “The Robot and I: How New Digital Technologies are Making Smart People and Businesses Smarter…” found that nearly half of banks (45%) surveyed had seen at least 10% revenue growth from analytics aligned with their front-office and customer-facing functions, a figure, according to that report, that is anticipated to rise to nearly three out of every four banks in three to five years!! 

As A.I technology becomes more ubiquitous financial advisors, as Sutton notes, will be able to take on a greater number of clients. This in turn will allow the market to expand as consumers and businesses become comfortable with trading financial products.

Soon having and managing your investment portfolio will in theory be as easy as ordering and paying for a taxi…. No human interaction required!!