We would like to look forward a bit at where the new robo-advisory model may go. While first movers like Betterment and Wealthfront have occupied much of the news coverage in the space, developments at other firms may over the longer term contribute more to sophisticated future offerings. Consider the following:
Computing giant IBM has contracted with Singapore-based DBS Bank to supply its Watson technology in business to consumer applications. Watson will be engaged to provide advice to DBS’s wealth management clients. Of course, anyone who watched Watson on Jeopardy can attest to the data mining power of the machine, and its potential to find and apply relevant information to specific situations. Reprogrammed for the wealth management space and fed by an increasingly rich store of customer information combined with comprehensive investment, news and event inputs, Watson 2.0 has the potential to be a very powerful service device.
Not long ago, BNZ Bank in New Zealand contracted with nViso to create an online experience called EmotionScan. Using a bank client’s indevice camera and sophisticated facial recognition software, EmotionScan detects the client’s emotional reaction to various financial scenarios allowing the bank to identify areas where clients are comfortable and where they are apprehensive or uneasy.
Let’s suppose a system like EmotionScan could be integrated with a communication and data mining engine like Watson to provide a real time interactive (possibly with avatars) advisory technology dedicated to wealth management. We believe this system would align well with the predilections of the “new” self-directed investor by being engaging/interactive, responsive, proactive, efficient, value-added and smart/knowledgeable. At the same time, it would be controllable, transparent, cost-effective and compliant. It could be trusted since its information and recommendations would be perceived to be based on knowledge and the unbiased application of informed judgment, not the “sales” or other personal agendas of real advisors.
We may be a few years away from this level of technology. But we believe the most successful current robo-strategies will consider equally the front-end client experience and the back-end product offering and will design these elements using the latest available technology against the needs backdrop of the relevant target segment.