Investments 

Failure to automate will see firms left behind

Failure to automate will see firms left behind

Financial services firms who do not incorporate greater automation and technology into their operational models risk falling behind their peers, Howie Li has warned.

Mr Li, chief executive for Canvas at ETF Securities, said: "Fintech goes hand-in-hand with automation and the increased use of data.

"If these processes are not integrated into financial services firms, then it is likely those firms with more manual or less efficient processes may fall behind their peers and competition."

In response to adviser questions asked during FTAdviser's live webinar, How to benefit from disruptive technology, Mr Li said it was "very critical" for financial services firms to engage properly with fintech.

Mr Li also responded to two other questions sent in by advisers during FTAdviser's OnAir event on 26 September.

These questions centred on whether the use of artificial intelligence was more of a "governance issue" rather than just a matter of having the latest technology, and whether fintech was a short-term fad to be avoided or a long-term trend to be considered.

In response to the adviser, Liz, who asked about governance, Mr Li commented: "There is indeed a governance question for sure. The use of artificial intelligence in finance is possible as long as the automation process links into the correct data, analyses and interprets the data in a rules based manner and adapts the outcome based on a set of known processes."

Therefore, Mr Li said it was crucial any financial services firms looking to improve their automation or incorporate AI into their processes should make sure a "governance framework is built alongside any developments in financial AI".

He explained: "The onus will likely be on firms to know exactly what their “machines” are doing, just as the expectation from regulators is that the management knows what its people are doing.

"The interesting thing with machines is their relative predictability - humans are subject to a change of behaviour or certain biases whereas machines are programmed to think, analyse and produce an outcome systematically.

"This will indeed require some deep thinking into the governance and risk framework."

Mr Li also responded to Erica, who asked whether investors should be concerned about investing in fintech and companies behind automation, as "trend investing" has negative connotations.

He replied: "Investors should not be worried about rising trends if they are backed by academic and expert research on the fundamental shift in the way we live and work.

"Short-term fads may be a concern but, if an investor believes that automation and data (and the protection of data) will continue to drive growth in the long-term, then the main thing to focus on is how an investment portfolio is constructed.

"The portfolio should really be focused on key companies that are driving these megatrends and not just relying on large cap tech companies."

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