Digital investment companies push the status quo in an industry that has otherwise been late to embrace technology’s opportunities. Digitalisation provides opportunities to streamline processes and create transparency. It will happen at the expense of traditional jobs and force people to adapt.
The emergence of technologies like artificial intelligence and the streamlining of automisation processes challenges the status quo in many industries. This creates space for new companies to challenge the industry’s existing players. The new technology changes the reliance on human labour and creates greater flexibility.
This is also true in the investment industry, which in many instances has been late to embrace the opportunities presented by digitalisation.
“There is a need for more simplicity, or rather less complexity, within the investment management industry as a whole. Investors should and will require greater transparency at all levels. The industry has been late to adopt new technology and exploit the opportunities offered by digitalisation. There is room for improvement when prioritising performance over the price of financial products”, says Andreas Olsson, CEO of the Swedish Investment Management Company iaib.se.
There is a new term to describe these opportunities: quantitative investments.
Innovative solutions change the landscape
According to McKinsey, automation has the potential to make millions of jobs worldwide redundant. Here, the predictability of the job plays a big part in how easily it can be automated. According to the survey, between 75 and 375 million workers worldwide will have to change careers or learn new skills by 2030.
The Swedish quantitative investment company iaib is among those who are trying to exploit technological developments to break into the Swedish and Danish investment markets.
The company tries to solve basic issues for investors by offering transparent, innovative, and performance and cost-effective investment products. Also, iaib has developed two investment strategies that the company plans to launch in 2018, both of which take advantage of the technological possibilities.
“Everything traded is based on a rule or model we have built. These rules and models are based on our views of how markets work, and our experience and knowledge. But it is the use of computers to systematically execute these rules and models that create the discipline, transparency, and solid long-terms increases”, says Andreas Olsson.
For the Danish company NORD Investments, the stated goal is to make it possible for everyone to cheaply and easily invest. Like iaib, NORD Investments uses a digital approach that helps the company keep costs down. On top of this, NORD’s digital investment service is being offered in cooperation with a partner bank, enabling NORD to run the business.
“For us, proper investment is being able to deliver a stable return at low costs, and in completely transparent terms. For this reason, customer’s portfolios are being built from index funds that follow market returns, and without covering up the price”, says Anders Hartmann, CEO of NORD Investments. “Abroad it is called robot advisor. There are not many robots in our operation, but rather algorithms and systematic methods, so it maybe not is a very accurate description. But the fact is that human, financial skills will become redundant”.
However, this still requires a transition phase, and there is no guarantee that the number of new tasks can replace the old ones. According to Anders Hartmann, the more traditional investment jobs will be absorbed by technology in the future.
“As for investment areas, I think that investment advisors and portfolio managers are hit hardest by robots and automatisation”, says Anders Hartmann.
Automation replaces people
At iaib and NORD Investments, many of the jobs traditionally executed by people are done by computers instead. This means that primary human work is in development, both from the bottom and throughout the process. However, according to iaib, that does not mean that human labour is seriously threatened.
“We do not see the advent of automated processes as a threat to the human labour force. We see it as a change in the kind of work people deliver and as an opportunity. Technology has always been a force for change in the way people work. We do not see this as any different”, says Andreas Olsson.
This is a point of view shared by Professor Jan Damsgaard, head of the department of Digitalisation at CBS.
“It is clear that the current content of many jobs will either be replaced by computers or disappear completely. But there will be new needs for human support, which will also create new job opportunities. And on top of this, new job creation elsewhere.”
Jan Damsgaard believes that a person must be able to do something special if they want to hold onto a position that can otherwise be automated.
“Today, you may be using a lot of human power to conduct analyses, but in the future, it will be possible to use computers. Those who remain will be highly specialised and able to do something
very particular. But even then they will be supported by artificial intelligence with the ability to process a lot of data very quickly”, says Jan Damsgaard. “As when the tractor first came to the country, those who could only shovel were challenged. But they ended up moving to the city to live in detached houses and helped build the welfare state in the 60’s and 70’s. Similarly, it might be hard to imagine what these people will do in the future, but I don’t think it is going to end with mass unemployment in Denmark”.