Morgan Stanley creates a love triangle with the device.
Morgan Stanley’s recent decision to partner 16,000 financial advisers with algorithms that may identify trades and prod brokers to attain out to clients is proof another in-road being created by machines into human roles. If brokers embrace this mind-and-machine partnership though, the payoff is job security within an industry where returns are paramount.
The financial services industry is highly Darwinian in nature, using its culture of “survival of the greatest performers.” Now, bringing artificial intelligence (AI) in to the mix is turning your competition up a notch. The most vulnerable, ironically, may be the high-performing brokers who may be tempted to keep alone without algorithmic assistance. But as we’ve observed in chess championships like Garry Kasparov vs. Deep Blue, the supercomputer of its time, or IBM’s Watson’s victory on Jeopardy!, when human and computer are pitted against one another, the computer wins.
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As research shows, however, a human-and-computer collaboration makes an unbeatable combination. That’s why running a business, science or other fields, people’s greatest collaborators will tend to be machines. On Wall Street, if a mediocre broker quickly adopts to utilizing a machine as somebody, he or she can be a formidable performer with an increase of job security, potentially outperforming the strong broker who won’t leverage the device.
Morgan Stanley, among the world’s biggest brokerages, will roll out its AI pilot to 500 advisers in July. The others of its brokers will be engaged by year-end. The project has been billed as an augmentation of human brokers, not really a robo replacement of these.
Automated wealth-management services, referred to as “robo-advisors,” already are becoming commonplace among many cost-conscious retail investors, who are gravitating toward computers for inexpensive asset allocation and investment advice. A report in Europe by Fujitsu discovered that 20 percent of respondents said they might buy banking or insurance services from famous brands Google, Amazon or Facebook. Uber has made a step toward financial services by partnering with GoBank to provide checking accounts and debit cards to drivers.
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For these digital disruptors, their mastery of machine learning would make it not too difficult to allow them to enter finance — arguably a lot more easily than financial advisers could enter the field of machine learning. This same problem confronted Wall Street in the 1980s when computers first entered the business enterprise. In those days, computer scientists grasped the basics of finance with greater ease than finance experts learned the basics of education. By combining expertise in each field — those that know algorithms and the ones who finance — Wall Street can provide a high-powered collaboration.
While traditional brokerage services have emerged as vunerable to an “Uber-like” disruption, particularly on the retail end, the high net-worth clientele segment is much more likely to be protected — at least for the present time due to the need for relationships.
Yet even here, the mind-and-machine partnership may take the higher end to some other level. Algorithms will send brokers multiple-choice recommendations predicated on market changes or events in a client’s life, with the aim of generating more business with customers. But humans are being augmented, not replaced. Bloomberg quoted Jeff McMillan, chief analytics and data officer for Morgan Stanley’s wealth-management division, as saying brokers will be necessary for the near future to advise wealthy clients with complicated financial planning needs.
It’s analogous from what we see happening in medicine, where AI has been used to improve physicians’ clinical knowledge to make diagnoses. You can easily imagine your day when individuals will wear biosensors that produce reams of data that may only be digested by computers to greatly help doctors manage patients’ health issues, from diabetes to allergies.
On Wall Street, a machine may master making accurate market predictions, nonetheless it does so in a “black box” — an extremely dark and unknowable pool for high net worth investors, specifically. These individuals are accustomed to the high-trust relationships such as for example in private equity, where you will find a premium for explaining how an investment strategy is structured and is likely to perform. Even the most accurate black box isn’t likely win the trust of a high-touch client who uses human relationship.
Thus, for Wall Street’s biggest brokerages such as for example Morgan Stanley, AI becomes an instrument for wealth management. While robo-advisors are embraced by retail investors, high net worth clients who are accustomed to high touch service will still need the human portion of the mind-and-machine collaboration. Because of this clientele, it’s a matter of trust.
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But as Morgan Stanley and other Wall Street firms embrace more AI, rely upon wealth advisement will probably turn into a triangulated relationship. Not merely must both humans — your client and the adviser — trust one another, however the two humans (and especially the adviser) must trust the device.
For the device, it’s about using data and machine understanding how to make market predictions and identify trade opportunities. For the human, it’s about relationships and building trust, a location of expertise where people still have co