Will AI replace human investment decisions?
The pace and scale of digitalisation continue to accelerate as financial services providers embrace technologies such as artificial intelligence (AI), machine learning (ML), big data and automation to gain a competitive advantage in the modern digital economy.
As the trend grows in prominence, people in the financial services space are increasingly asking, will intelligent technologies replace humans in the investment decision-making process? We asked members of Investec Wealth & Investment’s Global Investment Strategy Group for their opinion.
Augmented model offers best of both worlds
Annelise Peers, Chief Investment Officer, Investec Wealth & Investment, Switzerland, believes that certain technologies, such as big data, can perform certain tasks more effectively than humans. AI-managed portfolios, for example, can remove the inherent human biases and emotions that exist in traditional approaches.
“Implementing investment strategies are seldom straightforward, though, because there are multiple influencing factors at play. This creates complex scenarios that sometimes require human experience to manage. It's also important to have humans in the process to offer an explanation to clients if something goes wrong,” explains Peers.
Ryan Friedman, Multi-manager Investments head, Investec Wealth & Investment, agrees that AI cannot fully replace the human element. “There will always be a need for human interactions to make the correct investment decision, whether it's making judgement calls or determining whether someone is a good capital allocator in a particular market environment, for example.”
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Creating opportunities, not threats
John Haynes, Head of Research and Chairman of the Global Investment Strategy Group, Investec Wealth & Investment, believes the fourth industrial revolution is just the next evolution in the way we process information.
“I don’t perceive AI as a threat to portfolio and wealth management in its current form. In fact, I think AI will create numerous opportunities due to its ability to process more data at higher speeds. This functionality can deliver insights that could potentially assist investment managers to identify areas where they can harvest better returns.”
Chris Hills, Chief Investment Officer, Investec Wealth & Investment UK, agrees that the augmented intelligence model offers the greatest potential.
“Man and machine work better together than either in isolation. That's why I don’t think that AI will replace humans.”
The irreplaceable human touch
Phil Shaw, Chief Economist, Investec UK, adds that even the most advanced intelligent technologies are still prone to human influence. “AI is only as good as the human who programmed it, which is why I would be reticent to hand my money over a fully automated AI-based investment machine without knowing more about it. It’s a lot easier to trust a human.”
Additionally, the need for a human touch is even greater when it comes to managing wealth and private banking, believes Peers. “It’s not just about the investment for high net worth clients. Wealthy individuals still want to engage with a person, and their needs are multi-faceted, which requires a holistic approach that machines can not deliver in isolation.”
That's not to say we cannot augment technology into the process to automate, streamline and expedite mundane tasks that can enhance the customer experience, suggests Peers. “When AI can enhance transactional banking elements such as paying the bills and transferring money, humans can focus on the high-touch tasks that add the greatest value to clients.”