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Ian McKenna: Game-changing tech could transform risk-profiling


As reported by Money Marketing today, new technology is increasingly able to measure human emotion and how consumers make decisions. This has huge potential to enhance the analysis of attitude to risk and better understand client preferences.

A frequent argument I hear from people who say automated advice can never compete with human advice is that machines are unable to pick up the non-verbal clues an experienced adviser can detect when talking to clients. This emerging technology means this will soon no longer be the case.

Swiss-based Fintech firm nViso has been at the forefront of these changes for several years. In July it launched Emotion Advisor, an online tool that can be used by advisers to help their clients better understand how emotions influence their financial decision making.

As advisers frequently experience, consumers can be far from rational when making financial decisions. But how can we help them understand where such irrational behaviour comes from in order to address its impact when planning finances?

Using Emotion Advisor is remarkably simple for the client. All they have to do is position themselves comfortably in front of their PC, allow their webcam and microphone to connect with the software and align their face with the centre of a circle that appears on the screen.

The system first asks users to rank six financial priorities – retirement, investment portfolio, family and giving, cash flow, financial adviser and financially organised – simply by dragging and dropping tabs into a new order.

The user then simply takes a deep breath and listens to the system talking about financial matter for three minutes in total, spending a short time describing the six areas they have prioritised. During this time the system monitors their face and the various movements using 43 facial muscles that provide 170 facial tracking points and applies them to seven emotional states – sadness, fear, anger, happiness, surprise, disgust and neutral – based on the Ekman Facial Action Coding Standard.

A report is automatically generated at the end of the three minutes. This begins by showing the clients their personal reaction measured by the seven emotions to each of the six subjects explored. Users can click on the icons for each emotion to show these individually. It then compares the client’s stated priorities with those identified by the software to highlight subconscious differences between what the client is saying and their underlying emotions.

A comparison is provided showing the emotional reaction to each subject, and the system also includes the ability to show a partner’s emotional reaction to the same subjects. This will identify where there may be a need to compromise on solutions and preferences for each partner. Finally, a list of financial priorities from an emotional perspective is discussed.

In this format the software is not a competitor to the adviser. It is a great way for firms to stimulate client interest and highlights how companies will mix science and technology with their own service to produce the best customer outcome.

The current version is very much focused around the baby boomer generation and American baby boomers at that. However, even in this format, it is clear the technology has much to offer. The ability to understand consumer attitude to risk and other important factors based on emerging sciences could radically restructure the way such issues are approached.

nViso has the potential to enable advice firms to build new and far more customer friendly processes supported by science. The next generation of advisers will have a wide array of tools at their disposal that will enable them to have far greater insights into customers’ true preferences. This can only lead to better customer outcomes.

Cynics might suggest there will be little consumer interest in such an approach. However, the results of a trial of an earlier nViso system EmotionScan with Bank of New Zealand proved otherwise. During the exercise 200,000 people (6 per cent of the New Zealand population) used it. Systems like this will present a major challenge to traditional risk profiling technology. Traditional techniques of asking consumers a series of questions and capturing responses may become as obsolete as the paper-based processes risk-profiling software replaced.

Ideally, established suppliers will find ways to work with these new technologies to produce solutions that leverage existing knowledge while embracing new ways of measuring human emotion and decision processes. The service can be accessed at by anyone who wants to give it a try.

Ian McKenna is director of the Finance & Technology Research Centre



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Ian good article and it was interesting being interviewed by MM for the cover. I think Phil Young’s point is well made, while facial recognition and interpretation technology is powerful it is early days. It is really important to recognise where most firms are on the adoption curve today – early adopters are increasingly using iPads and smartphone tech with clients, many though remain wedded to pen and paper during the consultation. As service providers our job is not just to provide the best technical solutions but those that fit the advisers’ practices such that they are actually adopted. Think Toyota Prius v Sinclair C 5! Great features also have to fit into a compliant process which in the case of risk profiling needs to deliver an accurate, consistent and compliant risk assessment process from investor to investment. I wholeheartedly agree with the need for more rapid progress ( but it needs to be done in a way that solves an adviser’s suitability challenge, keeps them in the centre of the process and helps them look good and professional to their clients so they are willing to use it.

  2. My take is that such technology is a distraction to the advice process. Does a client want to be advised based on someone’s professional skills and qualifications to advise or to be offered quasi-scientific magic bullets?

    I’m also unsure whether professional advisers will want the intrusion of a ‘gizmo’ and the attendant distractions that such things bring. Does the adviser wish to become a monkey that merely turns the organ handle? I think and hope not.

    The fact that there’s an emotional aspect to people’s attitudes to is not exactly new news. Does being able to in some way quantify those emotional responses help the adviser? If you really believe that determining attitude to risk based on facial expressions is an improvement over existing ATR tools, you are certainly off piste as far as the regulator is concerned. Attitude to risk is just one element of the requirements for establishing suitability under COBS9.

    Advisers should rather be asking if emotional reaction software adds value to adviser and client. Does it make the process more reliable and consistent and effective and more robust when a complaint is made? From a complaints viewpoint, does anyone really think that a system measuring emotional reaction will get advisers and firms off the hook? One can hear the complainant claiming “I suffer from hayfever and my eyes were running”, “I had a cold and was sneezing” or “The cat started to claw the Chippendale and was ripping the upholstery”. These may be slightly facetious examples but you get the point.

    With the FCA’s review into Suitability to be published shortly, professionals should be guided by the review’s findings. I suspect that it will focus more on the lack of effective and consistently applied procedures within firms and the lack of business intelligence available to firm managers that informs them exactly where and with whom their investor suitability risks lie.

    Facial emotion software has a more than valuable contribution to make in ID validation, security and probably within market focus groups and the like. I do not believe, particularly at this stage, that it offers much value to advisers and clients for professional financial advice services.

  3. Riskalyze announced a slew of new products and services at last week’s T3 AdvisorConference. They now compete directly with TAMPs such as SEI, Assetmark, and Loring Ward. Of course, they had already encroached into the crowded robo-platform space with their Autopilot product where they locked horns with providers like Jemstep, Advisor Engine and Oranj as well as offerings from almost every wealth management platform provider and custodians.

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