Decision making not helped by robo-advice or big data

31 August 2017
| By Hope William-Smith |
image
image
expand image

Financial analysts and corporate companies are willingly submitting to an inaccurate belief that automation offerings including big data, algorithms, robo-advice and artificial intelligence (AI) are changing the game and worth investing in, according to MoneyQuest.

Managing director of national broking franchise, MoneyQuest, Michael Russell has released a paper on the increased use of and interest in automation where he called on companies to “scratch beneath the surface and illuminate what we are not being told”.

Russell identified the use of big data for better business decision making, the use of algorithms to make quick decisions, and the regular use of robo-advice as the biggest myths of automation use.

“Hordes of financial analysts and market commentators have jumped on the bandwagon to exclaim how bright our futures will all become when we willingly submit to a life of automation,” Russell said.

“Today more than ever before in our history, past trends and behaviours are actually proving to be quite unreliable in predicative modelling. 

“Technology is evolving at such a rapid pace and delivering so many unknowns, that our consumption behaviours are themselves becoming unreliable.”

Russell criticised big data as consisting of qualitative inputs but not crucial qualitative inputs that make up individual DNA, and said reliance on algorithms that were unpredictable was equally flaky in business practices.

“All algorithms are based on the personal subjectivity and bias of their authors,” he said.

“Mortgage professionals can properly assess an individual’s true character, capacity and credit risk [and] know that someone’s past is not always an accurate indicator of their present or future.

“If left unchecked, auto credit-scoring has the potential to be unwittingly unfair, unethical and discriminatory.”

The use of robo-advice and AI in mortgage broking was particularly a source of concern for Russell, who said reliance on automation fostered subjective and consequential bias that put professionals at risk of not fulfilling their compliance requirements.

“No two clients are ever the same and where our legislative obligations require us to thoroughly assess each client’s individual needs and circumstances today and into the foreseeable future,” he said.

 

 

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 2 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 2 weeks ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 6 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

1 day 11 hours ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 4 days ago