Decision making not helped by robo-advice or big data

Financial analysts and corporate companies are willingly submitting to an inaccurate belief that automation offerings including big data, algorithms, robo-advice and artificial intelligence (AI) are changing the game and worth investing in, according to MoneyQuest.

Managing director of national broking franchise, MoneyQuest, Michael Russell has released a paper on the increased use of and interest in automation where he called on companies to “scratch beneath the surface and illuminate what we are not being told”.

Russell identified the use of big data for better business decision making, the use of algorithms to make quick decisions, and the regular use of robo-advice as the biggest myths of automation use.

“Hordes of financial analysts and market commentators have jumped on the bandwagon to exclaim how bright our futures will all become when we willingly submit to a life of automation,” Russell said.

“Today more than ever before in our history, past trends and behaviours are actually proving to be quite unreliable in predicative modelling. 

“Technology is evolving at such a rapid pace and delivering so many unknowns, that our consumption behaviours are themselves becoming unreliable.”

Russell criticised big data as consisting of qualitative inputs but not crucial qualitative inputs that make up individual DNA, and said reliance on algorithms that were unpredictable was equally flaky in business practices.

“All algorithms are based on the personal subjectivity and bias of their authors,” he said.

“Mortgage professionals can properly assess an individual’s true character, capacity and credit risk [and] know that someone’s past is not always an accurate indicator of their present or future.

“If left unchecked, auto credit-scoring has the potential to be unwittingly unfair, unethical and discriminatory.”

The use of robo-advice and AI in mortgage broking was particularly a source of concern for Russell, who said reliance on automation fostered subjective and consequential bias that put professionals at risk of not fulfilling their compliance requirements.

“No two clients are ever the same and where our legislative obligations require us to thoroughly assess each client’s individual needs and circumstances today and into the foreseeable future,” he said.



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