Date
4 December 2016
Quantitative trading that requires a lot of number crunching and discipline is where computers excel. Fund managers specializing in this arena are hence likely to be replaced by robots. Photo: investopia
Quantitative trading that requires a lot of number crunching and discipline is where computers excel. Fund managers specializing in this arena are hence likely to be replaced by robots. Photo: investopia

Who will win in the fintech era?

The topic of the 2016 Financial Planning Association’s Annual Conference was fintech or financial technology.

Global financial planners discussed the future direction of the industry and how that would transform our daily life.

The most interesting topic for me was whether artificial intelligence (AI) would eventually replace human beings in the financial services industry.

If so, which sub-sectors are more vulnerable?

We all know that computers can process a huge database and has advanced calculation capabilities.

And robots are free from the influence of emotion and character.

Quantitative trading that requires a lot of number crunching and discipline is exactly where computers excel, which is why fund managers in this arena are most vulnerable to the rise of machines.

By contrast, the value investment approach adopted by investors like Warren Buffett should be more immune to such technological change as it relies more on fundamental analysis and input from interactions with company management.

How about the impact for the financial planning sector?

I believe some financial planners will eventually be replaced by automated investment service.

But those who handle high-end investors, which typically require a high degree of human touch, would be relatively safe.

Financial planners who understand client needs and know how to guide them to various professionals to cater to their demand in trust, investment, tax planning, retirement plans etc. leveraging on their personal connections or networks should continue to be in demand.

In the aspect of regulation, Don Ginsel, founder of Holland FinTech, said regulators have lagged behind developments in fintech and that poses a great challenge for them.

If the authorities don’t understand the technology, how can they regulate it in the future?

Policymakers are indeed in a dilemma. If they impose too many restrictions on the industry, that could choke off the development of financial technology.

But if regulations are too loose, technology could be misused, tarnishing the reputation of fintech as well as leading to losses for customers.

Regulators face a tough job in striking a balance between promoting innovation and averting fraud.

This article appeared in the Hong Kong Economic Journal on Oct. 20

Translation by Julie Zhu

[Chinese version 中文版]

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RT/RA

Founder and Managing Director of Pegasus Fund Managers Ltd.

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