Artificial Intelligence (AI) is transforming the way we live, and the tech giants are racing to stay ahead of the curve.
This race is also presenting opportunities for the financial services industry.
AI-related funding totalled an estimated $15.2 billion in 2017, a 144 per cent increase over the previous year.
The US tech industry leads with a 50 per cent share of those investments, even with China swiftly closing the gap in terms of patents and AI research.
AI itself isn't new, but boosted computing power, increased connectivity, and the sheer volume of data has paved the way for the fourth industrial revolution of AI.
"The coming era will be looked back upon as the 'AI era', when AI became the defining competitive advantage for corporations, government agencies, and investment professionals," predicts David Nadler, founder of Kensho Technologies.
Kensho Technologies deploys scalable machine learning and analytics
systems across the most critical government and commercial institutions in the world to solve some of the hardest analytical problems of our time.
The Potential of AI
Artificial Intelligence is less about sentience and more about accelerated learning.
AI technology looks for patterns, learns from experience, and predicts responses based on historical data.
An AI-powered computer can't produce a unique thought, but it can probably predict yours.
The end result: AI is able to learn new things at such a speed that it can predict your behaviour and pre-empt your requests.
From the advancements in natural language processing that make Siri and Alexa possible to the machine learning advancements that makes robo-advice a reality, AI's ability to simulate human thinking means it can also streamline our lives.
It can pre-empt our needs and requests, making products and services more user-friendly as machines learn our needs and figure out how to serve us better.
This makes AI a vital source of competitive advantage, and for the same reason, all the tech giants are making a bet on AI – with Apple, Amazon, Google, Microsoft and Facebook being the most bullish.
AI's Competitive Advantage
In their quest to stay on top of the Silicon Valley food chain, familiar tech and retail giants are dipping their toes in AI to execute diverse strategies:
Siri is Apple's artificial intelligent golden child with 500 million users across Apple devices globally. Apple acquired the tech in 2011 for $150m-$250m and rolled it with iPhone 4S later that year. Apple is notoriously tight-lipped about their AI research, but it's safe to say Siri is only the tip of the iceberg. The tech giant received a patent this year for augmented-reality glasses, slated for a release in 2020.
Amazon leverages AI technology to analyse and predict your shopping patterns. Alexa is at the forefront of Artificial Intelligence, and the revolutionary Amazon Go model continues to push the boundaries of AI tech on the ground. Amazon raised eyebrows in April 2018, however, when it filed a patent for "voice-sniffing" technology that would allow Alexa to eavesdrop on conversations and analyse them for marketing purposes.
Google uses machine learning and pattern recognition in its search and facial recognition services, as well as natural language processing for real-time language translation. The company has also released a series of smart home products, such as the Nest thermostat.
After acquiring more than 50 AI start-ups in 2014-16, this seems like only the beginning for Google's AI upgrade.
Microsoft's Cortana is powered by machine learning, allowing the virtual assistant to build insight and expertise over time. In 2016, the tech giant added Research and AI as their fourth silo alongside Office, Windows, and Cloud, with the stated goal of making broad-spectrum AI application more accessible and everyday machines more intelligent.
Facebook uses artificial intelligence to suggest photo tags, populate your newsfeed, and detect bots and fake users. The social media giant has also come under fire for widespread use of AI analytics to target users for marketing and messaging purposes.
These tech kings are driving the research that will increasingly intertwine our lives with artificial intelligence, and it's that investment that might secure their future.
It's not just the tech industry; the financial services industry has also begun to see AI vendors with solutions focused on wealth management, a sector that traditionally relies heavily on the relationship of the client with their human advisers.
As AI models become more refined, advisers will utilise personal data along with financial data to make better decisions. But, the industry doesn't anticipate a gloomy future where autonomous organisations make all decisions.
With all that said, while the adviser-client relationship will remain the foundation in the wealth management industry of the future, we foresee a decrease in the frequency of touch points between advisers and clients.
It is the responsibility of the adviser to ensure that these powerful tools are transferred into producing the best advice for clients.
We are curious to see how the broader implementation of AI will impact the human aspect of wealth: relationships and decision-making.
• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz