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

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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 emotionadvisor.com by anyone who wants to give it a try.

Ian McKenna is director of the Finance & Technology Research Centre