How Improvements in AI Could Lead to Better Financial Planning for Consumers

This article was originally commissioned for the July 2018 edition of the Investment Life & Pensions Moneyfacts Magazine. Tom Murray looks at how artificial intelligence could prove beneficial to providing financial services to the mass market. 

Currently, there are a myriad robot/artificial intelligence articles flooding the media.  If you read the comments it feels like you are listening to that old contradictory song from the 1940s musical “Annie, Get Your Gun”.  Only this time, instead of it being an argument about male / female superiority, it is between those promoting the superiority, or not, of robots over humans as decision makers.  The result appears the same as the eternal battle of the sexes: both sides are dug into the trenches and exhibit confirmation bias in the anecdotes they latch onto.  There is a lot of hot air being released but the question still remains; do the advances in artificial intelligence(AI) mean that robots will become part of our everyday life?

Many of these articles focus on the more fascinating effects on our lifestyles of the arrival of AI, such as self-driving cars and technological leaps in health-care.  Of course, the advantages of giving autonomy to cars was always bound to receive a huge amount of interest.  The concept was foreshadowed in much science fiction over the years and as auto-pilots for aeroplanes and driverless trains increased in public acceptance, it was only a matter of time before the logic of allowing cars to automatically drive and assess traffic risks was established.

And whilst recently a few accidents in cities running pilot programmes has wobbled confidence in self-driving cars, it is clear that general public acceptance is only a matter of time.  In the future, owning cars will become a pursuit for hobbyists rather than be an intelligent manner of fulfilling one’s travel needs.  But travel is an area where people are accustomed to surrendering control, whether to another human, as a passenger in a car, train or aeroplane, or to a robot, in the form of a driverless train or an aeroplane using autopilot.  To misquote Robert Louis Stevenson, for the majority of people “to arrive is better than to travel hopefully”; most people are so grateful to get to their destination in one piece that they are unconcerned about how they got there.

DOCTOR NO OR NO DOCTOR?

Similarly, in the field of medicine, after decades of increasing use of technology, there is a strong belief that better healthcare can be delivered by using AI and therefore the idea is meeting less resistance.  Researchers at Stanford University in the US have developed an algorithm that can identify skin cancer from images.  Other researchers are working on algorithms to diagnose Alzheimer’s from retinal scans and to analyse ultrasound images to identify possible foetal complications. Whilst these medical diagnostic treatments are still in the testing phase, the idea of diagnosis without any human intervention is a huge step into an automated future and has significant benefits to deliver high spec healthcare at a lower price.

This is not to say that there are not some qualms embarking on a medical treatment programme that was designed by an algorithm without any human input whatsoever.  Irrationally, some people are wary of this, even though a computer’s ability to perform as programmed repetitively without making mistakes is widely accepted, whilst the dangers from a tired or distracted human doing the diagnosis or planning the treatment regime has often caused problems in the past.

CAN A ROBOT CARE?

The use of AI in healthcare is about to expand far beyond the areas of diagnosis and treatment design.  Douglas Adam’s caricature of a marketing department’s slogan for selling a robot – “Your plastic pal who’s fun to be with” –  in the Hitchhikers Guide to the Galaxy was intended as a joke but it seems prescient now as the idea of the long-term care crisis being solved by robots taking the place of carers moves centre-stage.  Evidently, robots are beneficial for tasks such as ensuring that the elderly take their medications on time and in the right doses by issuing them from vending machines based on biometrics, or for delivering food and drink, or monitoring vital body signs.  However, the idea that a robot could take the place of humans in providing companionship may seem a step to far for many.  And indeed, outside Hollywood, the idea of a robot looking after you in the manner that C-3PO looked out for R2-D2 in Star Wars is a bit bizarre.

Yet this is precisely the type of real experiment that is underway in Japan.  Robots are being used for far more than just assistive care.  They are being programmed to help keep people connected, to talk to them, to encourage them to exercise and to provide them with suggested entertainment.  In some cases, the elderly patient has become as attached to their robot carer as if it was a pet.  Could this really be the answer to the problem of chronic underfunding and high cost in long term care for the geriatric section of the population?

Further experiments are also being undertaken in Portugal as part of an EU research project, with robots being provided in the homes of elderly people living alone.  Here though, the emphasis is far more on helping with practical matters although the plans are to move towards a companionship role.  Clearly the role of robots and AI in daily life is going to increase and have a huge impact on how we live.

LIFE AND PENSIONS INTELLIGENCE

So, if AI is going to have such a transformative role in other areas of society, can it weave its spell in the normally rather staid world of life and pensions sector?  Like the rest of industry, the life and pension sector has come a long way in its use of technology over the last few decades, but by now all the low hanging fruit for productivity gains have been realised; the automation of repetitive administration tasks and the large amounts of number crunching and forecasting that defines the industry is practically complete.  But the advent of AI allows new sectors of the industry to be considered for automation, and thereby cost reduction.  These are, essentially, those areas where decision-making plays a big role.

The fundamental basis of all product sales in the life and pensions industry is the financial advice provided to individuals by the expert IFAs.  The advice process is focused on designing the best possible set of financial products to suit both the needs and the means of the customer. It requires gathering large amounts of information about the customer’s current financial situation and needs, asking questions about their desires for their future and selecting for them a package of financial products that are affordable and yet well-structured enough to get the customer as close to their future goal as possible.  It also means showing the customer where their future hopes are unrealistic and to guide them towards choosing goals that are more attainable.

Given the scale of the work involved, the cost of financial advice is prohibitive for the majority of low to middle income earners.  This is a clear area where the introduction of AI based approaches could deliver huge benefits across the mass-market.  The work can be seen as more suited indeed to the robot adviser, as the gathering of the initial information is both time-consuming, repetitious and dull.  Intelligent use of voice control and electronic access to existing information such as bank accounts or utility information can help shorten this process but there is no getting around the fact that for a proper holistic view of an individual’s personal financial situation, a significant amount of time is required.

But taking it a step further means that once the data is in and the needs of the individual are identified, an intelligent robot is better placed than an individual to do full market research on the products available and to match them to the customer.  The one thing that favours the human adviser is that their empathy can make it easier for individuals to be open about their needs and current financial situation.  The rise of more empathetic robots in the care area shows however that the era of robots that people can relate to is arriving. This would be very useful in helping customers with their financial planning.  Up to now, computers could only operate in the set way they were programmed but the newer versions of AI that are coming out have feedback loops and self-learning capability, which will enable them, like humans, to grow with experience and become ever better at understanding their customer and that customer’s needs.

Most of the younger generation live their lives on social media.  The life and pensions sector need to keep up with this as this vital cohort can difficult to reach through any other means.  Robots can trawl through large amounts of data in real-time to make sure that opportunities to engage with people are taken at just the right moment.

THE WATCHER NEVER SLEEPS

Given the longevity of many of the products in the life and pension world, clearly ongoing interaction between the customer and the company is required and this is also a highly labour-intensive process.  Once customers are engaged and have purchased products, then an ongoing review of how well these products are performing in order to meet the needs of the customer is important.  Robots allow this type of interaction to be performed regularly at a modest price, whereas the cost of regular face-to-face meetings with financial advisers would be extremely expensive and out of reach for the majority of life and pension customers.

When markets move, they can move very quickly, and yet financial advisers cannot monitor everyone’s portfolio in real-time to make sure that changes are made when necessary.  Robots can.  The use of artificial intelligence to monitor performance and to recommend changes or even to be given the autonomy to make those changes is a game changer in terms of protecting investments.  This is the kind of capability that has been available to professional advisers for a long time to provide better services to their high-net-worth clients, but the advent of intelligent robots brings about the possibility of the same facilities to be available to ordinary customers at a cost that they can afford, putting them on a level playing field with the professionals in their ability to react to real-time movements in the market.

Even for customer-directed changes, the ability of artificial intelligence to execute changes, make recommendations or provide warnings or alternatives makes it so much more cost effective to provide services to the current generation on an anytime / anywhere basis, giving the ultimate customer full control over how they interact with their financial plan and products.

THE ROBOTS ARE COMING

The leaps in artificial intelligence comes at an opportune time, given the increasing speed of financial movements in the markets and the need for more personalised services.  It enables lower and middle-income earners to be provided with service levels that were strictly the preserve of the high-net-worth individuals up until now.  Whilst many of the abilities referenced above are still in prototyping or testing phase, the arrival of the intelligent robot in the workplace is now a given and its use will dramatically expand the reach of financial services into the lives of the lower and middle-income sections of society.

The only reaction possible is to embrace the brave, new world of AI and to work to ensure that its benefits in the financial services sector are spread across the widest possible section of society.  When it comes to providing financial services to the mass-market, AI does indeed do it better.