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Cognitive Wealth Management

Learn about cognitive wealth management from our David Poole, Head of the Financial Services Center of Excellence, via Bankless Times.


While roboadvisors have their advantages – and indeed many financial service providers have adopted the use of these tools to support customer service, assess risk and formulate investment recommendations – one major obstacle to a pure digital platform has emerged: the investor.

As financial organizations sought to improve the customer experience through technology, it appeared that some failed to consider the preferences and perceptions of consumers. This was borne out by our own research, conducted of 235 retail investors to gauge their attitudes about digital investment platforms. It revealed that while many people are comfortable with the use of AI to inform their investments, the vast majority are not willing to allow a robot to perform decisions without human oversight.

For example, three out of four investors agree that a roboadvisor can inform their decisions by explaining option differences. On the other hand, just 28 per cent of investors are willing to let an AI-enabled platform manage or rebalance accounts.

Given these findings, it is perhaps unsurprising that many financial services organizations have reaffirmed the need for human oversight, even as the world continues to reach new levels of digitization. They are realizing that the self-service model – a wealth management approach that presents an option of digital technology or human touch – is increasingly inadequate. Instead, there is a need for financial institutions to refine this model and look to the opportunity that deeper, more advanced application of AI presents.

The power of advanced AI – which includes intelligent processing, machine learning, and deep learning – can go beyond basic automation of human activities and perform much more complex tasks, such as accurately tracking market opportunities, anticipating and addressing compliance issues, and even identifying new clients.

We call this shift to a deeper, more intelligent use of AI “cognitive wealth management.” Like traditional self-service models, cognitive wealth management uses AI to provide client-facing tools, such as intuitive onboarding, portals and interactive dashboards.

However, it also goes deeper, targeting both the operations of the firm and the entire wealth management value chain. By targeting both front- and back-end functions, and infusing AI within the wealth management process as a whole, this model unlocks new levels of client-centricity, organizational efficiency, and cost savings.


Bankless Times

Publish Date

May 3, 2018


David Poole

Cognitive wealth management: Human x digital

The wealth management industry has always been steeped in data. However, while traditional models have calculated risk and return based on limited data sources, such as demographics, assets, liabilities, and goals, AI-enabled tools draw on deeper and broader data sets to perform such tasks. With a cognitive wealth management model, it is possible to forgo the standard customer segments and instead establish a truly unique 360-degree view of the individual – one that calculates individual risk in a much more accurate way and takes into account everything from projected healthcare costs to real estate holdings.

A cognitive model also allows financial institutions to increase the depth of data. Whereas traditional advisors look at investor data from the years that they managed a client’s portfolio, an AI-enabled cognitive approach can look back as far as records are available for the individual and the market, thus identifying trends and patterns that are impractical for human advisors to produce.

Further, as social media and other online platforms continue to play a growing role in customers’ lives, it is important to consider what these channels may tell us about the client – particularly with respect to relative unknown areas, such as spending patterns, hobbies, and other lifestyle habits. As digital engagement continues to grow – especially among younger consumers – it is important for wealth management firms to incorporate these data sources into their assessments.

Risk Calculation 

In many cases, firms rely on self-reporting tools to gather the data to calculate risk that is subject to the investor’s irrational thinking and biases, as well as their selective memory. A cognitive model, on the other hand, takes client-provided data and then cross references with other sources. In providing these checks and balances, this method improves objectivity and reduces human bias. Further, in a traditional model, the fund selection can be susceptible to the advisor’s conflicts of interest. The cognitive approach diminishes this risk by acting as a fiduciary, automatically allocating the lowest cost funds.

Finally, the cognitive approach calculates risk in a dynamic way, meaning that it uses the latest market data, coupled with current investor needs, in real-time to determine the right advice. Unlike the traditional models, rebalancing is a proactive task that can take place as frequently as needed.


In a traditional model, wealth management teams are siloed, which means that the investor might get advice on taxes, success planning and investments from disparate sources within the same organization. What’s more, communication between these business units is often infrequent and ineffective. These groups can be unaware that they are engaging the same individual, and may be providing conflicting information about asset allocation and long-term planning. A cognitive approach can help raise awareness and share information within the organization. While addressing the silos is going to take time, this model can provide a bridge in the short-term.

With existing self-service models, robo advisors are limited to portfolio building and rebalancing. But with a cognitive model, it is easier to advise on a broader range of needs, including tax planning, goal-based advice and personal insurance. What’s more, this approach can also understand the right context for that advice. For example, if an investor searches for “living will”, this model can trigger appropriate advice on life insurance, and likely find a receptive audience.


Regulatory compliance has always been a major concern for financial institutions and in today’s digital age, the landscape is only becoming increasing complex. For U.S. financial institutions there are over 200 rules from 14 regulatory bodies that became applicable since 2010. Regulatory documents are expected to exceed 300 million pages by 2020. Rules cost the six largest US banks $70B with over 10 percent of their workforce dedicated to this area.

Existing wealth management models do not adequately protect the organization from these risks. In fact, since 2008 banks paid $321B in fines globally, thus underscoring the need for more effective tools to monitor and assess regulatory issues.  While still evolving, a cognitive approach can drive immense efficiency in this area by using AI-enabled technology to ingest every rule and provide decision-making support. These platforms can also proactively alert the proper department when a potential issue arises or if a new rule applies to its business, help anticipate cyber-security risks, and build compliance awareness across company silos.


In evaluating their wealth management strategy, financial institutions must consider the landscape: the industry is experiencing a chronic shortage of wealth managers; regulatory complexity continues to increase; and investment managers are under constant pressure to provide high-touch service to clients.

The organizations that succeed will be the ones that create a robust, 360-degree view of the customer and use the latest in technology to provide an individualized investment plan. A cognitive approach – one that unites digital and human for exponential growth across the whole value chain – is the next generation model that institutions should consider to ensure growth and long-term viability.


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