Robo-advisors are one of the most prominent future prospects for the financial sector. Being able to invest in exciting companies and products through an online conversation sounds very attractive.
But artificial intelligence is not sufficient to give proper investment advice. IBM wants to integrate the blockchain into artificial intelligence, and have created a new business unit centered around this concept, with robo-advisers just one of the many exciting prospects.
Robo-Advising Needs More Than Just Artificial Intelligence
The way robo-advising works is as follows; consumers are given advice by a “robot’ through a chat platform. In most cases, financial service providers will rely on artificial intelligence (AI) to provide advice. By using machine learning and deep learning, the AI software can “learn” and be given a more humane appeal to platform users.
The concept of AI has been attracting a lot of attention in the Fintech world. Both emerging and established financial service providers are experimenting with the technology. But some industry experts such as IBM, feel AI alone will not be sufficient and have created a new business unit to merge blockchain technology with artificial intelligence.
Industry Platforms Business, as this new venture is called, will create optimized processes and marketplaces to its users. Leveraging technology such as Watson, blockchain, and IBM Systems, it should bring new forms of innovation to the table. Additionally, this new venture will also focus on actively promoting artificial intelligence in the financial services sector.
The blockchain can be used for many different purposes, both within and outside of the financial sector. IBM wants to strengthen their position in the blockchain business. More importantly, the company wants to establish open technology standards, which should help with the accelerated adoption of this technology.
A Hybrid Robo-Advisor Is Worth Pursuing
The IBM development comes at a time when the financial sector is looking ahead, for example at hybrid robo-advisors. Adding a software component to human interaction during the client advisory process is of the utmost importance. However, that software needs to be scalable, transparent, and not hinge on central points of failure.
According to MyPrivateBanking, hybrid robo-advisors will manage close to US$4 billion worth of assets by 2020. That is quite a big number, yet it is only the beginning, as the numbers are expected to quadruple by 2025. In terms of wealth management representation, hybrid solutions will outperform traditional robo-advisors six to one.
Investment portfolio management will only grow in popularity over the coming years. Consumers are more keen to trust robo-advisors compared to bank staffers for investment advice. With blockchain combining with AI, robo advisers could offer transparency and peace of mind for investors. Moreover, millennials want as little to do with banks as possible. Therefore, blockchain and artificial intelligence seem to be strong complements and the amalgamation of the two will no doubt disrupt investment and banking services in the near future.