The Intelligent Enterprise in the Era of Big Data

CHAPTER 5 ACTIVE ADVISING WITH INTELLIGENT AGENTS

5.1 Introduction

In this chapter, we describe an intelligent machine for the wealth management advisory market. The solution we offer will transition this industry to Enterprise 4.0. This industry is already witnessing the first innings of a major transformation due to a number of factors.

We first describe the business and current practices and then the RAGE AI™ solution that will assist in transforming this industry to the E4.0 state. This solution is already in use in global wealth management firms.

5.2 The Investment Advisory Market

The investment advisory services market is undergoing significant change driven by a multitude of factors. On the one hand, increased regulatory compliance requirements are raising the costs of doing business and putting pressure on business model of asset and wealth management firms. On the other, the rapidly evolving technology environment is enabling new disruptive business models (“robo-advisors”) that threaten to commoditize the “high-touch” advisory model practiced by asset and wealth managers. Simultaneously, finance theory is evolving to recognize that there is a bridge between a strictly behavioral approach and a strictly mean-variance-based framework in terms of optimizing an individual's wealth.

Optimal design of portfolios has been the subject of much attention and discourse in the academic literature. Recently, behavioral finance and the conventional mean-variance framework have ...