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Automating Financial Advisory Services with Artificial Intelligence

By Percy Chong, 1st July 2015

With considerable experience dealing in Sales Compliance and Training & Competence (T&C) projects with local Financial Advisory Services firm, ASG have observed a chilling reality. It is possible to automate a great deal of the Financial Advisory services and processes with “artificial intelligence”.

How is it possible to replace or minimise human interfacing in a role that demands so much human touch, ingenuity and service interactions? It sounds too much like some B-grade Sci-fi movie plot.

Ironically, this reality is only made possible with our current well-defined Compliance framework and Training & Competence guidelines. With the evolvement of these framework and guidelines, abstract and subjective element of the business, have been “quantified” and made objective through the Decision/Logic Tree (Decision Analysis) methodology to protect the interest of consumers. And thoughts and feelings have been “reduced” to black or white.

Many back-end process matrixes and checklists (eg. Risk & Compliance Matrixes, Supervisor’s Know Your Client Review form etc) have already been developed to assist organisation analyse situation/ information recorded and break down the possibilities to determine the correct course of action or solution. This branching method serves to “play-out” every possible outcome to arrive at a decision in the most logical structure.

And this same science may also be applied to FA firm’s front-end sales process (ie. KYC form, Client Knowledge Assessment etc), thereby eliminating the need for a Financial Adviser Representative (FAR) to be present during the completion of the fact-find forms.

These fact-find forms may be developed to embed logic to rule out or in, certain functions or requirements (to confine the discussion within the regulation framework). Clients will be able to self-complete them and the algorithm behind the forms will swiftly arrive at the suggested solution recommended. Again, this know how does not seem too far away, especially when the Regulator’s FAIR Dealing Guidelines requires all FA firms to conduct their own product due diligence and ultimately develop their own product suitability matrix (to match with the right market segment). And it may surprise non-practitioners to learn that there are only a handful of products that are consistently package and sold to the great diversity of customers. So the client’s situation or requirements may not be as unique as we want to think.

The only drawbacks are for such bold implementations would probably rest in the need to simplify and make the form completion process easy and user friendly. And to fully benefit from the speed and efficiency of the algorithm, it only makes sense to do away with the hardcopy version and go entirely paperless, or even FAR involvement.

ASG also do not deny that there are some prospects/clients requiring some customisation or special consultation for their unique situation. We expect their numbers would fall within the “acceptable” range of deviations (ie. Standard Deviations, the extremities of the Bell curve). And it should not be played up for what it really is, and marred the potentially huge benefits of cost savings for the FA firms adopting this practice; which in turn will filter down as considerable savings to consumers.

Prospects/clients within these range bound criteria could simply be identified by the algorithm and referred to a FAR for a face-to-face consultation. Or these prospects/clients could simply elect to have a FAR assigned to them for a fact-find meeting.

With such implementations, there will only be a need for limited number of FARs, and a handful of competent Supervisor/Financial Services Manager (FSM) to provide quality assurance check and sign off each transaction. This process for FSM validation is already in place and it should continue to safe guard the interest of the consumer as their last line of defense.

So with the reduced staffing requirements, there will be considerable reduction in business cost. ASG feels that smaller FA firms should consider this strategy to mitigate the rising operation cost, as well as the huge cost of developing and maintaining a distribution channel, like a Tied-Agency. Larger FA firms could also leverage on their extensive customer base and develop a “farming” process to automate Accounts Management with well-timed reviews and follow-up business.

Not only that, the approach will eliminate the chance for mis-selling and hard-selling, both unavoidable when the human element is involved. And from time to time, selling mistakes may also happen. There may also be some unique situation or newly evolved requirements that have yet been identified or embedded into the algorithm. Again, these newly emerged situation resulting from the dynamism of the human progression, would likely fall within the acceptable range of deviations. The Decision/Logic Tree may be updated with new parameters or Regulations as the market’s needs evolves.

To address the naysayers whose repeated claims that Financial Products (especially Life Insurance) are not bought but sold.

With the global trend of consumers buying products and services online/DIY growing exponentially, who is to say that consumers will not be seduced to cross-over. And as more complex products and services are being introduced into the marketplace, what appears to be complex now may just be a norm, thanks to proliferation and public awareness.

With all things said, ASG don’t believe that automation by “Artificial Intelligence” will ever happen! ASG feels that the Regulators would unlikely allow it to happen. And it probably has nothing to do with the complexity of products and services, because it can be effectively mitigated by the regulations based algorithm. Regulations and Decision/Logic Tree methodology thrives on clarity of facts and rules.

But the Regulators will weigh the massive loss of jobs and public outcries from Singaporean and Permanent Residence who are participating in the industry. Because after all, Property Agents, Taxi Drivers as well as Financial Adviser Representatives, have long been perceived to be “protected” profession restricted only to Singaporean and Permanent Residence; and it is unlikely to change in favour of any artificial intelligence or the aliens (ie. foreigners) alike.

On a sobering end note, under the right conditions, automation of Financial Advisory Services by artificial intelligence can definitely happen today!

Article contributed by Percy Chong (through Asian Sales Guru)
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