AI may be answer to financial health

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AI may be answer to financial health

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Thirty-year-old office worker Sohn is typical of a number of hesitant investors who have found an easy-to-use financial adviser with the help of artificial intelligence.

Sohn had never dabbled in the stock market or subscribed to investment funds. But recently, he looked for better returns because of the disappointing 1 percent interest he was getting from the bank on his deposit accounts. He thought 5 percent interest would be a good return on any investment.

Sohn, however, couldn’t build up the courage to visit a brokerage firm for investment advice. But recently, he received information from a friend that he could get investment advice online without having to deal face-to-face with a consultant.

He logged into Samsung Securities’ website and clicked on the “smart adviser” menu item. He input 300,000 won ($250) for a monthly investment plan with a five-year investment period. When he clicked on “results,” the computerized consultant suggested 20.29 million won as the investment profit target and showed details of how the suggested portfolio can achieve the target profit.

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“When customers make specific investments, the program actually makes purchases according to the designed portfolio,” a Samsung Securities official said. “The investments can be made without having to go through a private banker, and it also consistently manages the customers’ investments.”

Artificial intelligence investment consultancy, or simply “smart asset management,” has become a major trend in the local financial market.

The artificial intelligence program uses big data to manage customer assets autonomously once the client completes a simple online survey that shows the person’s preference and characteristics.

The investment portfolio can be changed accordingly to the market situation and reflect the opinions of the client.

As various financial companies, from commercial banks to brokerage firms and even fintech, or financial technology, companies, are offering such services, individual investors who have been unaccustomed to stock or fund investments now have better access to financial asset management at a low cost.

Dunamu, a company that operates a mobile stock exchange app, recently released a new app called MAP that provides an investment portfolio customized to the investor’s preference in conjunction with asset management companies and consulting companies.

The minimum subscription fee is 5 million won, and the commission charged on discretionary investment is roughly 1 percent.

NH Investment & Securities became the first in the local financial industry to develop a so-called robo advisor that debuted in late December last year.

The QV Robo Account requires a minimum investment of 2.5 million won, which allows anyone to subscribe to the service. Additionally, subscribers do not have to pay a service commission, as the service does not automatically manage the investment portfolio. Investors only pay commissions on sales strategies provided by QV Robo. Although it currently only offers services on three exchange-traded funds, the company plans to expand the service.

KB Kookmin Bank last month became the first among local commercial banks to provide a robo advisor that is jointly serviced with fintech company Quarterback Technologies.

Yuanta Securities’ home trading system, T Radar 2.0, offers artificial intelligence service that advises clients on when to buy and when to sell. Adopting the concept of a weather report, when a stock shows upward momentum, a sun symbol appears, but when it goes down, fog shows up. It also provides recommendations for which stocks the client should sell.

“Because it is managed under a system unlike brokerage firms’ researchers, it provides lists of stocks that the client should sell without having to be shaken up by the market’s situation or personal emotions,” said Jeon Jin-ho, head of Yuanta Securities Korea’s online strategy.

Yuanta Securities Korea offered 150 stocks for sale with the help of the system.

Brokerage firms’ analysts and researchers seldom recommend sales on certain stocks. One of the reasons often cited is that many of the conglomerates whose stocks are traded on Korean exchanges are also major clients of brokerage firms. Recommending investors sell the stocks of clients of such major firms inflicts huge damage on the brokerage firm.

Many financial companies are getting involved in smart asset management services because of growing demand, particularly in a time of low interest rates.

The investment consultancy and discretionary investment market in Korea in 2012 was 74 trillion won. That grew to 121 trillion won last year.

Previously, such markets were concentrated on high-profile investors with large incomes. Today, thanks to the active smart asset management systems, even small investors whose investments are between 2.5 million and 5 million won can receive similar-quality services. Another attraction is that investors can easily change their investment portfolio within 24 hours.

Financial companies and fintech have marked this area as a new growth engine and have been increasing their marketing to target young people.

“Since smart asset management services do not need an offline operation, companies can save on management costs, which could lead to lower commission rates and minimum investment requirements,” said Chung Young-woan, senior executive at Samsung Securities in charge of smart businesses. “Smart asset management will change the landscape of the investment industry.”

Samsung Securities created a separate smart business department in December last year.

Chung of Samsung Securities said that in Korea, where the environment for mobile devices is very much developed compared to other countries, smart asset management can become a necessary tool for people to increase their personal fortunes.

“In the early stages, most of the investments [made by artificial intelligence] will be centered on exchange-traded fund products,” Chung said.


BY LEE SEUNG-HO [lee.hojeong@joongang.co.kr]







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