SEI Wealth Platform SM UK Solutions Director Helen Oxley describes her concept of ‘Driverless Finance’ to Zoya Malik, managing editor of TFT, and how AI will transform the wealth management industry as it seeks to answer transitional and multigenerational segment demands for growing and securing wealth in an ever-shifting digital world.
Zoya: What is “Driverless Finance?”
Helen: The concept behind Driverless Finance is to create an environment whereby our finances “manage” themselves in the most efficient and cost-effective way based on our individual requirements and the degree of support we allow the driverless entity to have.
Driverless finance is enabled by the use of technology with a fundamental reliance on advanced AI to create a micro-personalised financial ecosystem. For the technophobes and privacy-conscious who insist on not having a digital footprint when it comes to managing their wealth, they will still be able to manage their own finances with or without a financial adviser. Think of it as the choice between sitting in the back of a driverless car and conceding complete control for your journey, and sitting in the driver’s seat and deciding when you want to drive or switch to a driverless option, for example when parking.
We envisage a future where technology platforms like ourselves can bring together data from banks, existing policies, borrowing history, and even an individual’s social media data to allow individuals to create their own tailored profiles and financial plans. The most granular data needs to be accessed to make that profile as precise as possible and the use of it efficient and expeditious. For example, insurance companies are looking at fitness data, which can assess heart rate, activity levels, exercise, sleep and stress levels, to provide tailored solutions for clients. The same kind of unique risk profiles can be used across our finances. For instance, the same data that insurance companies use to predict longevity can also be used to calculate retirement drawdown requirements. So, effectively, we are seeing the convergence of financial services with information from these myriad sources of data to create all-encompassing solutions. The entity that drives this data-rich solution could be a big bank or a big disruptor like Amazon, who already have the infrastructure to continually analyse and provide critical information.
As a concept, Driverless Finance is attractive to a great number of people because it supports any life journey (i.e. attending school or university, a car purchase, mortgage application, marriage, divorce, retirement, illness, etc.) Life’s journeys are no longer linear; therefore, providers must evolve to better support the complex life choices the end client has to make. Technology must aid individuals to remove emotional decisions from the analysis and cater for continually optimised investment decisions, especially in view of the devolved nature of pension, retirement and succession/inheritance planning. As a result, and by way of example, millennials who do not necessarily prioritise going to university immediately after school can get a job and study later in life with the potential to borrow against their own savings/investments to finance this, if that is the most optimal position at the time. This model will employ data science to help solve their financial journeys. This group is also less interested in money, more likely to take sabbaticals throughout their working lives and are ready to make significant changes, as and when they want. On the other hand, older people who want to embrace technology recognise that, generally, there are very few strategies that cater for the “unexpected” in later life, such as divorce, serious illness or even a longer working career. All of these eventualities can, of course, have huge financial implications.
Zoya: Which segment of clients will Driverless Finance (DF) impact and how will you educate and change traditional notions of investing?
Helen: Driverless Finance crosses all segments of clients, whether you are wealthy or less so. DF will help enhance value by reducing costs across the board and creating compound marginal gains by optimising tax wrappers, removing emotional decisions and procrastination – all of which help clients to achieve their goals. If we all had the time, knowledge and wherewithal, we would be much more efficient with our finances. It is expected that most of us will live longer and will need more to fund our retirement. Therefore, the load on us to support our retirement will burden us for longer. Driverless Finance enables those with less money to manage their needs and goals efficiently, but also helps the more wealthy clients optimise their finances. It is likely that the more wealthy clients will operate a hybrid model that encompasses technology and human advice.
As for the question of education, the point of driverless finance is that the technology removes the need for us all to understand complex financial products. Encouraging people to make use of what’s out there could come from the challenger banks, such as Monzo who deploys currency cards with preferential foreign exchange rates being embraced by groups of people, especially millennials. SEI is specifically looking to support its existing target market by deploying technological advancements to personalise client investments and optimise their tax positions. The focus is around our portfolio management solution, which will allow each consumer to have a personalised solution within a specific risk appetite. We have also created a Centre of Excellence in AI and a Centre of Excellence for blockchain. This should allow us to uniform operations, streamline our processes and create significant reductions to back-office time and risk, (i.e. removing manual work will reduce risks and human errors.) Our clients will see improvements over execution lines and be able to service a greater number and range of their clients. We will partner with other fintech companies to enhance our services and contribute to the next generation of wealth platforms.
Zoya: What are unique digital footprints in terms of an individual’s wealth? How will new tech calculate for this?
Helen: The financial footprint really starts with bank account data and patterns that can be studied and classified at a granular level, so providers can analyse unique risk level. There is a lot of allocation around spending. Challengers can see how and what a client has spent at different stores, and soon they will know what a consumer is buying, especially if reward cards are used. They will also look at an individual’s emotional footprint, such as ethical preferences. For example, you may be a vegan and not want to invest in companies or products experimenting on animals. We can know your investment preferences, vet that into a model portfolio and still manage the risk profile. In the past, managers were doing financial analysis on spreadsheets; now, we can run algorithms on an individual or a group, and as a result, interchange assets in the mix.
Zoya: How will the advances in AI, robotics and blockchain advance the wealth management industry and how is SEI investing in these capabilities?
Helen: We see this as the bifurcation between back-office and front-office functions. Blockchain will uniform processes in the back office across the industry, helping to reduce risk and cost. Alongside this exercise, we can bring the cost savings to the front office and adopt big data and AI to help provide our clients with a better service. At a more granular level, AI can be utilised to proactively support the end client. Our clients will be able to nudge their clients with that data in addition to the data they collect from other systems. The benefit will be more personalised relationships with clients en masse, and as the system matures and learns, the more support and efficiencies it can create for the end clients.
Zoya: How are challenger organisations and fintechs competing with the wealth advisory industry?
Helen: A lot of companies see the challengers and fintechs as competitors; but on average, an advisor can effectively only look after around 200 clients with full advice per year. If the industry can collaborate to bring about Driverless Finance, advisers can adopt this technology to provide a much broader and integrated service for their clients and cater for a much greater number of clients, thereby growing their businesses.
Zoya: How will digital technology democratise access to wealth products, advisory and funds for a larger audience?
Helen: Simply put, by stripping out the costs. If we can facilitate micro-investing in a cost-efficient way by deploying blockchain, low-cost payment processing solutions and fully-automated digital identifiers, you can give many more people access to the same solutions available to the wealthy.
