The rise of bionic advisers

George Mitra, CEO and Co-founder, Fintso, on the benefits of becoming a bionic adviser.
By Morningstar | Feb 09, 2021

Technology touches us in all aspects – and has changed our habits in a fundamental way on how we interact with the world. This aspect has not been one-sided. The reverse flow of information has now become so much that surfeit data sometimes becomes a hindrance to decision making. An action paralysis of sorts, caused by data traffic jams.

To address this, technology (of course!) came up with another solution – Artificial intelligence (AI) and Machine Learning (ML). The promise being that just feed the data – and voila, we get answers to questions. Well, in theory at least. The financial and investing field is one such area. ML does have the advantage of sifting through the data and giving answers to just which of these are important, and if there does exist any relationship in the first place.

When it comes to personal investments though, there is another aspect that has also to be taken into account. Emotions and behavior. It’s all very well to have a Roboadviser tell me to invest, or to sell, based on some questions it may ask. But frankly, we do not get the confidence that it truly is a customised solution for us. And while I may implement some things, I really would not want to entrust it for my life goals. Terminator comes to mind too easily.

Enter the Bionic Adviser.

What exactly is bionic advisory?

Bionic advisory works at the convergence of digital technology and human experience. A Bionic adviser allows an adviser to use their wealth of experience in financial markets and products to tailor investment strategies for her/his clients. Someone who knows you, your goals, and can tailor the recommendations made through technology tools to customise to your needs.

Apart from customisation, this also allows the “human touch”. Advisers usually have taken years to build a “bridge of trust”. Their endorsement of new technology helps their investors accept and adapt to this change.

Adopting this technology also helps advisers. Being able to interpret data provides ways to improve a client's returns and reduce risks, by helping them interpret data to a much larger extent. This in term provides a differentiator and a competitive advantage.

A bionic advisory model can help an investor understand their risk tolerance, sharpen their strategy, and realise their investment goals, all while having a firm handle on the costs involved. 

Who is bionic advisory for?

A financial adviser plays the primary role of interacting with and advising clients and taking responsibility for their portfolios, doing the most for them is the primary focus. This is exactly where bionic advisory comes into the picture. Bionic advisory is not a B2B solution aimed at taking over the functions of an adviser or putting them out of business. Data as of now shows that adopting a Bionic approach has a much higher acceptance rate than Roboadvisory.

At the same time, it is also becoming increasingly clear that investors also prefer their advisers to be equipped with the latest tools and technology to help improve their returns. They expect that their advisor would be able to interpret and also, filter, such suggestions to what is suited for them.

Benefits of such a model

Even with all the advancements in technology, the importance of human experience can never be forgotten in the world of financial advisory. There are things about our understanding and the way we work that machines can never replace.

A lot of the manual and repetitive work can be automated using robotic process automation systems, systems while the person-to-person advisory, which is critical takes center stage.

The role financial advisors play will remain critical too. A study shows that for 65% of millennials and 58% Gen X, financial advisers remain their trusted source for information and it is likely to continue. Bionic advisory here, too, can enhance the experience by providing IFAs with a range of machine learning-based insights into the market that can then be presented to clients, ensuring better-rounded, and data-driven advisory.

Manage money and emotions

Often, financial planning and investing is a lot about being able to manage your client’s emotions too. It is easy to be hasty or delayed in making decisions and often could lead to suboptimal results. Having a human advisory on call who can rely on experience to make better decisions can be decisive.

An experienced adviser who is personally invested in your success is a great asset to have especially when there is ambiguity and turbulence in the markets. Managing emotions and making wiser decisions are often the key to long term and sustainable success.

Do more with less

A bionic advisory model is great not just for the clients but for advisers too. Technology takes care of a lot of the repetitive tasks and helps an adviser provide dashboards to clients. It allows you to take care of more clients and manage more accounts by relying on the power of technology.  These features make the conversations sharper and more value-added.  Nearly 150 million users are expected to leverage robo-advisory solutions by 2023, underlining the immense opportunity.

One of the other benefits is that advisers can also rely on the relationships to cross-sell and upsell products that are beneficial for the clients. The relationship you have with the client is of great value when they are introducing new products or trying to balance the portfolios. 

Be more inclusive

One of the biggest advantages that a bionic advisory offers is that it takes the benefits of advisory to the smaller investors who would otherwise find it out of their reach. For a new investor, this advice is critical and helps them manage their investments much better.

Bionic advisory helps keep the costs low and hence these services are more affordable for all, thereby making It more inclusive.

The challenge

One of the biggest challenges to adoption is costs. It is extremely difficult to build out such technology solutions. Availability of data, maintaining the same, and continuously making improvements, is in itself a daunting proposition.  This is the primary reason that such technology has been limited to large institutions offering the same to their select clients.

With the advent of new-age platforms, this type of solutions are now becoming available to independent advisers, and through them, to their clients. In effect, giving them the tools, like the sling-shot, that allows David to take on Goliath.

In conclusion

Bionic advisory is a model that has immense potential in the world of investing and advisory, especially in India. It is natural evolution given how technology has grown coupled with the low financial acumen that most investors have.

For the advisory industry, there is a pressing need to bring more clients into the fold and also at the same time evolve a model that can serve customers without costs spiraling. This model offers the industry the solution to that problem.

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