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Cognitive Technology in Investing

Personal Finance | Published on Aug 10th 2017 | Comment(s) 0
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Technology is rapidly changing the way Indians make financial transactions. Artificial intelligence combined with big data, social analytics and learnings from consumer behaviour are helping investors to reach their financial aspirations. Systematic investment recommendations combined with intelligent financial planning ensures that users will not only receive the best advice but would also get follow up advice to make sure that they are on track to reach all their financial needs.

Most Indians save first and think of spending later. However, when it comes time for them to plan their expenses they end up relying on mental estimates of their financial position. As a result, most people are never confident of 1) how much to save and 2) whether they can reach their financial aspirations with their current investment plan. This is especially true for young professionals who want to save for a secure future but also want a more fulfilling life experience. What is required is financial advice that delivers the answers to these questions in a clear and quantified way.

However, finding good financial and investment advice was never a straightforward task. Though professional advice was available, it was largely offline, static and was limited to wealthy individuals. A fee-based advisor would provide effective financial planning but due to the cost it was not accessible for most investors. The offline model was also inflexible and any attempt to change an investor’s investment or financial plan required active intervention and assistance of the financial advisor.

A solution to these issues has come from the field of artificial intelligence. Cognitive technologies is a branch of artificial intelligence that deals with the application of computers towards tasks traditionally performed by people. The aim of this process is to design a software solution that has comprehensive and detailed instructions, that enables it to do the same work that a person can. The benefits of this approach is that the same work can be done at a much faster pace, at a higher accuracy and at a lower cost.

A computer can examine tens of billions of data points. This processing power, guided by expert insights tests to find which factors are responsible for helping select the best investments. This process is constantly refined until a strategy with the best possible returns is found. Thus, a systematic way of finding the best investment opportunities is available to investors.

Traditional financial planning offer little in the ways of flexibility of implementation. It is also very hard for a person to track their progress toward their financial goals. Cognitive technologies are now addressing these issues by using specialised tools, accessible on mobile platforms, which would exponentially increase their reach. The power of computing also allows for nearly unlimited customization and as a result, the investor gets a solution that specifically addresses his needs. The tool is able to deliver this by analysing investor behaviour as well as personal data inputs to arrive at a customized result.

A major challenge in financial planning and investing is that investors are usually unable to understand technical terms. Most investors are unsure why they have been recommended particular investments and how that recommendation is made. This results in confusion and less willingness to follow through on the financial plan provided. However, mobile apps provide an interface that is user-friendly and helps him find what is suitable to his needs.

Mobile apps work best when they find activities that engage the user’s interest. Similarly, financial planning works best when the investor’s financial plan addresses his financial needs, investment plans and recommendations while also considering circumstances unique to him. Mobile apps can help deliver this by creating a financial plan that both includes his personal financial needs as well as recommendations that address issues that are familiar to him. Intelligent mobile apps are continuously learning from user behaviour to find and recommend appropriate goals and investments that will fit with any individual user’s financial plan, to give him a truly unique solution.

Financial and investment advisory is one of the domains in India, which remains very under serviced. As young people enter the workforce, they will need advice on how to invest their savings in order to help them save for their personal and familial obligations. In addition, financial planning can also help improve the quality people’s lives by reducing their fear of an uncertain future. Thus, financial planning is only going to get more important and with better digital solutions coming out, the future looks bright for the informed digital investor.




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