Weekly Briefing No. 177 | Humans and Robots Working Together, Google’s Government Woes, and More

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Welcome to The FR, where people and machines live in harmony.

In this edition:

  • From Human to Robo-Advisers — and Back Again

  • Google’s Government Woes

  • AI and Analytics in Asset Management

  • Banks Embrace Blockchain

  • Fintechs Hock Their Wares at Money 20/20


From Human to Robo-Advisers (and Back Again)

Machines are meant to take most every job away from humans, or so the common sentiment (and frequent media buzz) declares. In financial services, this trend is nothing new; decades ago, the advent of the automated teller machine was supposed to herald the demise of the bank branch.

More recently, the rise of tech innovation has caused something of an existential crisis in the financial advisory space, with new digital tools changing the traditional adviser/client relationship. The rise of the robo-advisers meant that for many retail investors — specifically low-to-medium-dollar investors -— interaction with a human wasn’t needed. An algorithm that knows some basic info about your investing risk threshold and goals could do the job for you. Just set it and forget it, to borrow a phrase.

Well, it seems the tide may be shifting back again — or at least halfway back. Bank of America Merrill Lynch announced this week it will soon be adding human advisers to its digital advice platform, Merrill Guided Investing. The advisers will “fill a service gap between the firm's purely digital, self-directed robo-adviser and the full-service advisers of Merrill Lynch Wealth Management,” according to InvestmentNews. While technology and automated services will no doubt continue to play a critical role in the delivery of financial services, perhaps we will reach a pleasant middle ground where robots and humans exist happily side by side.

Google’s Government Woes

Were you one of the many affected by the outage of various Google services last weekend? Perhaps you were furiously typing about your experience of woe and adding it to the lengthy #YouTubeDOWN thread on Twitter? If so, you experienced just a brief glimpse of the headaches that Google has before it.

It’s not just the obligatory public apology/shaming that any tech company has to perform after an outage of any length. More seriously, Google and its parent company, Alphabet,  are facing increasing scrutiny as the Department of Justice moves toward an antitrust probe of the tech giant. The probe is expected to focus on Google’s search business, as well as potentially its advertising practices.

What’s more, unlike other companies (or industries) that have been the subject of government investigations before, Google has very few political allies. Politicians of all stripes have been expressing concern over the power that Google and the other tech behemoths wield, and one assumes there aren’t many that would be willing to stand up for Google in the midst of an antitrust investigation.

AI and Analytics in Asset Management

In the investing space, both artificial intelligence and unstructured data have become big topics in recent times. AI has transformed how traders, asset managers and others can glean insight from the massive amount of data that exists today.

In a notable piece of synergy in these areas, Liquidnet this week expanded its AI offerings with its acquisition of Prattle, an automated investment research provider. Prattle uses natural language processing and machine learning to produce analytics that traders can use to make sense of unstructured data, such as measuring sentiment and predicting the market impact of publicly available content including central bank and corporate communications. Asset managers can then use these analytics to understand and anticipate relevant market movement, strengthen investment theses, and inform trading strategies.

It’s part of an overarching strategy for Liquidnet in the AI space; in the last two years it has also acquired OTAS Technologies, an AI-driven analytics firm, and RSRCHXchange, a data aggregator and marketplace research provider. We suspect there will be many more deals like this going forward as savvy investors seek to exploit any edge they can get out of market data.

Banks Further Embrace Blockchain

We have covered in the past how cross-border payments are ripe for disruption. They are generally slow, inefficient and done in an antiquated manner. Some fintech firms like Ripple have proposed a blockchain alternative, and it seems some banks would agree on that concept... except they want to create their own. Swiss bank UBS led a $63.2-million funding round, featuring several other financial institutions as well, into blockchain firm Fnality International. The company was created by the 14 firms involved in the investing round and is the culmination of a four-year project by UBS to create a new digital token called the utility settlement coin, or USC. The token would be used to settle cross-border trades, and act as both as a payment device and messenger that carries all the information required to complete a trade. It’s another small step, but a significant one, in the acceptance of blockchain technology by financial firms.

Fintechs Hock Their Wares at Money 20/20

A decade or so ago, fintechs were seen as barbarians at the gate, ready to disintermediate and replace the incumbent firms. Nowadays, most just want to get acquired by large financial institutions. Or, it seems, large tech firms. That’s the scuttlebut from Money 20/20 in Amsterdam this past week, where CNBC reports “fintech firms positioned themselves as attractive partners, and possible takeover targets, for industry giants vying for a slice of the trillion-dollar global payments market” such as Apple and Facebook. Many of these fintechs see big tech firms as the future of financial services and want to get in the action early. Perhaps they will end up disintermediating traditional financial firms after all.

Quote of the Week

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

-Mark Twain