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Advisor Insights


Taking finance into the future

There's a lot more to financial firms than meets the eye - some are also developing leading-edge technology.

By: SARAH BARMAK

Date: February 6, 2017

When you think of companies experimenting with virtual reality, artificial intelligence and data analytics, a Silicon Valley startup, and not a global financial firm, likely comes to mind. Yet deep within Fidelity Investments’ Boston office sits the startup-like Fidelity Labs, where tech and finance experts work together to create cutting-edge technology.

Launched in 1998 as the company’s research and development arm, Fidelity Labs gives the mutual-fund firm a place to experiment with ideas meant to help solve some of the most pressing personal finance issues, like saving for retirement and investing.

Some ideas might come to fruition, some might not, but at least they have a place where they can be given a try.

“There’s been a steady stream of emerging technologies that have business value,” says Sean Belka, Senior Vice President and Director of Fidelity Labs. “We tend to say, ‘That’s interesting. What should we do about it?’”

Many others in the financial industry are also turning to technology to help create better financial outcomes for their clients. And they’re all trying to answer the same question: “How do we get the population to properly save for retirement?” says Susan Christoffersen, a professor of finance at the Rotman School of Management.

Running with virtual reality

In an attempt to solve this issue, Fidelity Labs created an experiment for Oculus Rift that displays a person’s stock portfolio as a city – allowing investors to get a bird’s-eye view of their investments without looking at a single number. Buildings represent stocks and their height represents their price, while sunshine and rain reveal whether markets are up or down.

“Different people learn differently,” says Mr. Belka. “Some things become more tangible and more visceral.”

He describes how some investors suddenly realized that their investments were clustered in the “technology stocks” neighbourhood of the city. While they may have known that abstractly before, the visualization drove it home.

Fidelity recently announced a new experiment with VR called Beyond Gaming: Virtual Reality and Finance, looking for a new way to help human-resource managers look at complex data sets on how employees save the money they earn. They’ve created a 360-degree video that shows part of the new demo and also reveals how the company is approaching VR today.

The rise of artificial intelligence

It may be hard at first to guess at the potential applications of AI in finance, but the technology has already changed the way some companies serve their customers.

For instance, Fidelity’s Cosmo program, which debuted early last year, uses voice-recognition software to improve the often thorny experience of calling customer service. It asks customers why they’re calling so it can better understand their needs. It then routes them to the right person.

“In the past, you’d hear, ‘Press one for so-and-so.’ Now you hear, ‘Please tell us what you’re calling about,’” says Mr. Belka.

The technology relies on AI, which in the past few years has improved the accuracy of voice-recognition software from 85 per cent to 98 per cent – the threshold needed to be useful.

“We believe AI is going to be some of the most profound technology in our industry over the next five to 10 years,” he says.

Christoffersen agrees that that VR and AI can help people save and invest better. These technologies address people’s knowledge, getting them to know what’s going to happen with their portfolio and help the understand the biases they have, she says.

“There’s knowledge creation and helping people understand what’s out there,” she says. “It might be online learning about different products. Artificial intelligence is really about using a lot of data and then trying to make prediction models. A lot of industries are benefiting from that, and the financial industry is one of them."

More startup than fund firm

Some of these technology-focused financial firms could be considered more of a start-up than an investment firm. Fidelity Labs, for instance, has roughly 150 staff.

It also invests in relationships with other idea people, working with business schools like Stanford, Rotman and others. Mr. Belka is a program director at TEDxBoston, where he interfaces with experts on disciplines as diverse as computer science and health care to understand how machine learning is being applied.

That wider learning allows him to put new ideas into production – often years before they’re ready for prime time.

“Sometimes we’re too early,” he says. “If you look at Google Glass, that hasn’t gone to scale, but we brought some of our learnings from that to Oculus. We had the Pebble watch before we came to Apple Watch. But being there first gives us the maximum amount of time to learn. So when it does go to scale, we have a relatively customer-tested offering.”

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