Over the last 15 years digital technology has proved itself in the financial world with the increased automation of investments and trades. By 2006 the London Stock Exchange had over 40% of its orders conducted by algorithms. Four years later Mayfair company Derwent Capital Markets became the first Twitter driven hedge fund beating the market in their first month of trading. Machines are now able to assess short term markets more efficiently that humans as seen with high frequency trading. Retail investment is also being automated with robo-advisers offering younger investors a chance to enter with smaller fees and a minimum outlay. But just as full service brokerages adapted to DIY brokers, financial advisers and planners are moving towards a hybrid solution of human and online services.
Automated investing boosts efficiency as improved technology always does but with the added benefit of human interaction it will come down to the individuals at the core of a technically led firm that will dictate its overall performance. The two polar opposites of ‘tech only’ or ‘human only’ models are in danger of losing out on the best of what can be delivered to investors.
A number of mainstream robo-advisers have already taken steps to provide professionals to help clients in their planning stages just as DIY brokerages did when first offering their lower cost services. Online financial services for investors have increased the access to the markets with more now able to start with lower budgets and on platforms that offer speed and simplicity to those who prefer less contact. Depending on which platform is used investment choices made during an online process can be checked with human advisers.
The confidence built over recent years that in some circumstances machines can navigate risk and manage our finances without human interaction points to an outcome where the convergence of tech and traditional practices can produce a best in class hybrid solution. With industries like HFT and robo-advising it can be easy for some to adopt an all or nothing mind set when it comes to the use of technology. The bottom line often begging the question ‘if I go down the tech route will an algorithm always have the final say?’.
Auto investing can act as a low cost introduction to enter into the financial markets and provide a platform for those who have little time or interest in what drives their investment forward, as long as it makes a return. For those who do have an interest in how the markets work and why a machine might be suggesting a strategy, there are online tools to help ask the right questions when verifying their findings with a professional.
Financial advisers and planners have increased their services to include online tools that provide metrics that are specific to their client’s needs. This is not surprising following the withdrawal of many High Street institutions from the financial advice market with the ending of most commissions in 2012.
Award winning financial advice platform SaidSo.co.uk provides clients with full access to online independent financial advice, with its recommendations backed by professionals who take around 10 days to arrive at a bespoke solution.
Founder Keith Churchouse explains further ‘Our business has been working on this model and its principles for a decade. The significant push towards digital solutions will grow, particularly with the now identified ‘middle-market’ who are mainly un-catered for by the current market solutions. The Financial Advice Market Review announced by the Government and the FCA in August 2015 is a testament to this significant problem in allowing the mass market to access good quality financial advice, with the ability to implement agreed actions, at an affordable price.
In our opinion, one significant way to achieve a co-ordinated service on a national basis in a cost effective manner is through the internet, using a carefully designed process. The opportunities are hugely significant and we believe the combination of SaidSo systems and professional advisers will meet this market need. We anticipate many large providers returning to this vibrant market through this type of service because the volumes will produce the margins required’.
Social media and the advent of the Twitter cash tag has attracted increased volumes of online activity, spanning from sharing views and experiences of the financial markets to calculating the mood of the crowd by machine reading news and posts.
Aggregated social and news sentiment is being used to predict long and short term trends and in some cases can be seen as driving the markets as views are shared by large numbers of influential groups. Millions of views are posted daily and investors are able measure the mood of the markets before price movements happen with online indexing tools. With market data available to reference historical and live social data against, new investors can start to become familiar with reading the markets.
Financial services have become more accessible than ever and advisers are able to offer more transparency to clients with online tools accessible around the clock. As many diversify their practices in the light of these changes the hybrid solution of online services back by skilled professionals stands out as an attractive option for both new and experienced investors.