The imaginary future role of the asset manager
Much of the discussion taking place at FundForum 2016 in Berlin is speculation about what the immediate future of the industry looks like.
The workshop held by Muto Labs on Wednesday afternoon's Future Finance Forum delved into a set of imaginary futures somewhat further ahead. Which of these were plausible? Which weren't? The audience had to decide.
The scenarios
Three possible scenarios were put to the audience to consider:
- Asset Managers and robots competing with each other in a world where some clients would choose to deal with humans, and some with robots.
- Asset Managers who have become experts in artificial intelligence spend their time designing algorithms and fine-tuning them. Those algorithms deal with the end user.
- Asset Managers as coaches, understanding the client's desires and turning them into investment strategies, and handing those to machines to execute.
The key questions were: Who are the investors? What does value mean? What are the assets? If any of these scenarios came true, what regulations would we need?
Once the scene was set, three groups discussed each scenario in a lively debate for the next 30 minutes or so.
The results
Overwhelmingly, all the groups felt that humans still had a key role to play in the future of asset management.
The first group considered the scenario where humans and robots competed with each other.
"For millennials and digital natives, time and attention are scarce resources, this will play an important role in determining what people do and don't do," they concluded.
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However: "There is a fundamental tension where people will turn to machines and algorithms more and more for that which is straightforward, but when it comes to anxiety and emotion, they will want intercession from humans, and hand-holding.
"When we look at the processes behind it, our worry is that the more information you feed into a personalised algorithm, the more it becomes an echo chamber reinforcing the data you put in already, so you end up with search results that are so tailored that you don't encounter anything outside your particular world view.
"We could say there is a better and more robust process, where skilled guides are helping people encounter things outside their thinking; but for a lot of people time, ease and efficiency trump that - and actually, do they want choice at all?
"Do they want to be guided, or do they want to click on the button that says "Amazon Asset Management recommends"?
"The question is not what machines can do but what we should let them do."
The second team, which was imagining asset managers as fine tuners of algorithms, produced conclusions very much in line with this.
They presented the argument that we're no longer talking about an individual making decisions about assets, but rather the experiences they go through in life. The role for financial intermediaries, then, was much more that of an adviser, who intercepts at the moment that those decisions are being made.
"It's important for our systems to understand the drivers of individuals and how they lead their lives - and everything else being automated from there," said the group.
"We still need a watchdog - a regulator - to moderate, and to have system checks and balances.”
Finally, the team discussing asset managers as coaches had the hardest time agreeing conclusions.
However, they agreed that asset managers could indeed become technology companies - but that it was critical to do that without relying entirely on algorithms to manage money.
"Our view is this scenario can happen only if the consumer has a machine that tells them what is the right behaviour to have when markets are volatile, how they should invest their money, and how they should save their money.
"One of the key things in our futurist vision is that actually the consumer has a different approach to consuming products. In past we were bombarded with useless advertising, these days we receive targeted information. The machine is going to tell us what we should do by taking into consideration our needs – the machine will know everything about us.
"But we will have an option where we fully the trust machine, as well as an option where the machine tells us what to do, but we remain in control of what has to happen.
"It's like sitting in a driverless car," they concluded. "For the first few minutes people try to grab the wheel, but after a while they get used to it."