Robo-advisers: A.I. and ESG investing

Robo adviser

Author: Mr Chin04/05/2021

Sometimes I think understanding the complicated mind of a person is more difficult than understanding the universe.

The advent of artificial intelligence (A.I.) has caused much controversy over the replacement of humans by robots. In recent years, A.I. has been widely adopted in different industries, such as the fully automated robo-advisers that can help financial institutions to provide clients with wealth management and investment advice.

When it comes to financial advisers, whether they are humans or robots, we always wonder how well they know us and our investment needs. Investment is not simply mathematics but involves many personal considerations. Besides, some people may try to pursue their belief or values through investment instead of just seeking monetary returns. For example, the increasingly popular trend of green and sustainable investment is preferred by those who want to look beyond the returns and create positive impact on the environment, especially the climate.

Today, investors can choose from a wide range of green and sustainable investment products, such as funds or ETFs. You may visit the SFC website for the list of authorised green and ESG funds.

Financial advisers have to communicate with their clients in order to know them well. A.I. is good at algorithms, but not with communication. While robo-advisers mainly collect information through online questionnaires, which are often designed from a risk-return perspective, they seldom address issues like values and personal preference, and do not take into account the client’s personal circumstances, which may change over time. The lack of emotional engagement means that robo-advisers may not be able to fully understand and analyse the values and needs of the client beyond risk and return.

However, with the rising awareness of green and sustainable investment, some robo-advisers now offer related investment options, or even support from human advisers. Those who are looking for an affordable green investment option may seek help from the robo-advisers.

Read more: Should I use a robo-adviser?