Fintech on Friday: Financial services and robotics far from natural bedfellows

Jonathan Cohen is one of a rare breed. He is both an experienced wealth manager, having worked with London & Capital, Goldman Sachs and multi-family office Bedrock, and an expert in new technology and robotics. Many would think this is a match made in heaven, with private banks queuing up to say how they are using digitisation and artificial intelligence to boost their customer experience and organisational efficiency.

But the proposed marriage between financial services and robotics is an awkward one, with very little in common between the two areas, believes Mr Cohen, managing partner of investment adviser RoboCap.

“Robots are machines controlled by microprocessors. Fintech may be a form of automation, but it does not have much to do with robotics, AI or machine learning, it is just software automation,” he says.  

“AI and machine learning will eventually have an impact on investment management, but that is not the case just yet. Robotics and automation have a greater impact on other industries. In wealth management, they are just buzzwords at this point.”

While wealth managers claim to use artificial intelligence and Big Data to help shape client experience of portfolio management, the reality is that clients are just slotted in a defined model portfolio according to their risk profile, says Mr Cohen, essentially ending up with a prefabricated solution. Apart from ATM cash machines, finance does not really lend itself to robotics in its current format, he believes.

High net worth individuals interested in this type of fast technological progress are far better off investing in other industries, which can profit from AI, suggests Mr Cohen.

One key area influenced by robotics is self-driving cars, likely to be on sale by 2019. Level 3 vehicles will be self-driving, although must have a human on board who is able to take full control within seven to 10 seconds of detecting a hazard. Vehicle manufacturers such as Tesla and Volvo use the autonomous car sensor technology, developed by Israeli firm Mobileye, recently purchased by Intel for more than $15bn, or by Nvidia.

Mr Cohen has 3 per cent of RoboCap’s $57m fund invested in Mobileye – one of typically 20-30 holdings in his product – now likely to benefit from legislation on autonomous vehicles flagged in the Queen’s Speech. 

“In the US, the framework is already in place, in Switzerland they are working on it. Every country is moving at its own pace,” he says. 

Car technology providers are still working on solutions for Level 4 vehicles, whose onboard computers can deal autonomously with a much greater variety of hazards, and Level 5, which have no steering wheel and essentially act “like a mobile living room”. 

“These cars need to use machine learning to analyse many situations to see how humans deal with each one and then adapt to cultural habits of Rome, London or Los Angeles,” says Mr Cohen.

He also expects fast development of drone technology to impact companies such as Amazon, already designing its own drones for some home deliveries. In addition to transport and logistics, other industries expected to benefit from robot-related efficiencies include manufacturing and medicine, where robots can both help perform surgery and allow disabled people to increase their strength through exo-skeletons.

RoboCap looks at investments in firms where at least 40 per cent of revenues are related to robotics. Family offices in Switzerland have been early subscribers, with several investing between €1m ($1.06m) and €2m.

Mr Cohen admits he faces an uphill struggle competing with some much larger players as he simply does not have their marketing power, overseen by big brand names Nikko, Daiwa, Axa, Pictet and Credit Suisse, though he claims his fund lost less than competitors during corrections. “Other funds lost more as they are invested in companies such as Google, so they are not pure play robotics. We want to be as pure as possible.”