Make your fi­nan­cial ad­vi­sor a robot

Prestige Indonesia - - Agenda Gadgets -

THE CON­CEPT OF HIR­ING pri­vate bankers or fi­nan­cial ad­vi­sors to man­age in­vest­ment port­fo­lios is com­mon in the world of in­vest­ment. Clients de­ter­mine a spe­cific tar­get and their ad­vi­sors try to build and di­ver­sify the port­fo­lio to achieve their tar­get.

Nowa­days, the con­cept of hav­ing fi­nan­cial ad­vi­sors re­mains the same -ex­cept that they may be robots in­stead of hu­man be­ings. Ma­chine learn­ing­based ad­vi­sors cre­ated through an ad­vanced al­go­rithm can au­to­mate a num­ber of in­vest­ing pro­cesses; from analysing the mar­ket to pick­ing the right stock or even man­ag­ing your en­tire as­set port­fo­lio.

In the dig­i­tal era, where Ar­ti­fi­cial In­tel­li­gence (AI) is a pop­u­lar topic, you can re­fer to Wat­son, a su­per­com­puter de­vel­oped by IBM that com­bines AI and so­phis­ti­cated an­a­lyt­i­cal soft­ware. It is used by an AI-based ETF (Ex­change Traded Fund) firm called EquBot to man­age re­tail ETF to pick stocks in much the same way hu­mans have done for a long time.

In Indonesia, Fintech (Fi­nan­cial Tech­nol­ogy) is on the rise and has quickly taken on an im­por­tant role in a coun­try where the rates of the un­der­banked and the un­bank­able are still high. The rea­son why Fintech is so at­trac­tive is be­cause of the fast process for its in­vestors to cre­ate an ac­count. A Fintech plat­form can give you a list of po­ten­tial busi­nesses in which to in­vest and cal­cu­late re­turns.

What you need to know about Fintech Lend­ing is that it is dis­tin­guished be­tween P2P Lend­ing (Peer-to-Peer Lend­ing) and Pay­day Loans. P2P Lend­ing fo­cuses on pro­duc­tive loans, such as for busi­ness or ed­u­ca­tion.

One Fintech lend­ing com­pany has been de­vel­op­ing a tech­nol­ogy-based in­vest­ment fea­ture, in lend­ing cap­i­tal for dig­i­tal SMEs, called RoboLend­ing for the past two to three years. It has been able to pro­vide con­sis­tent re­turns to its clients. In 2016 and 2017, lenders in the plat­form man­aged to achieve av­er­age an­nual re­turns of 19 per­cent and 20 per­cent. RoboLend­ing of­fers au­to­mated in­vest­ment ex­pe­ri­ence for its lenders.

This fea­ture has been de­vel­oped by KoinWorks, one of Indonesia’s lead­ing Fintech Lend­ing com­pa­nies, which has been reg­is­tered and su­per­vised by the OJK (Fi­nan­cial Ser­vices Author­ity) and fo­cuses on pro­duc­tive loan sec­tor. It was awarded the Most In­no­va­tive Fintech of the Year 2017 Award by Bis­nis Indonesia. KoinWorks was re­cently backed by a con­sor­tium led by Mandiri Cap­i­tal Indonesia for US$16 mil­lion.

A new wave of al­ter­na­tive in­vest­ment through P2P Fintech plat­forms such as KoinWorks has emerged. KoinWorks al­lows you to al­lo­cate a cer­tain amount of money us­ing its pro­pri­etary ma­chine­learn­ing pow­ered in­vest­ment fea­ture, RoboLend­ing, to achieve a cer­tain tar­get of re­turn over a pe­riod of time.

How does RoboLend­ing dif­fer from an AI-pow­ered in­vest­ment man­ager and per­haps other in­stru­ments? KoinWorks con­ducts tight as­sess­ment pro­cesses on each of its prod­ucts. If a prod­uct qual­i­fies, a spe­cific Grade will be set from A1 to E5 (a to­tal of 25 Grades).

The Grades rep­re­sent the risk level and in­ter­est rate. The closer the prod­uct to A1 Grade, the lower the risk but the in­ter­est rate is also lower and vice versa. The fun thing is, ev­ery in­vestor can choose which prod­uct to in­vest in based on some cri­te­ria, such as in­ter­est rate, risk level and tenor, which will de­pend on their pref­er­ences or risk tol­er­ance.

To mit­i­gate the risks, lenders are ad­vised to di­ver­sify their in­vest­ment funds into sev­eral prod­uct at once. It is also rec­om­mended to in­vest in prod­ucts with var­i­ous risk lev­els and in­ter­est rates. RoboLend­ing will au­to­mate all of the in­vest­ment pro­cesses to achieve a pre­de­fined in­ter­est rate gained within a spe­cific du­ra­tion.

Say a RoboLend­ing loan with 12 months of tenor has a 13 per­cent in­ter­est rate. It will learn and give re­turns based on the mar­ket and the lender will gain on av­er­age 13 per­cent re­turns per year at the end of the tenor (lump sum). The ad­vanced ma­chine learn­ing will make that hap­pen by cal­cu­lat­ing the in­ter­est rate of each avail­able prod­uct and analysing the risks to make it pos­si­ble to gain 13 per­cent within a year.

The in­ter­est rates will vary ac­cord­ing to avail­able tenors and risk lev­els. The higher the risks, the higher the rates as the re­wards. It will be a great fit if you’re look­ing for a long-term in­vest­ment, es­pe­cially if you pre­fer to “in­vest and for­get”.

There are many as­set classes avail­able for in­vest­ments, such as time de­posits, stocks, mu­tual funds, obli­ga­tions, gold and so on. But a new breed of al­ter­na­tive in­vest­ment, specif­i­cally Fintech, is on the rise and gain­ing pop­u­lar­ity. Do you want to ride with the new era of dig­i­tal in­vest­ment?

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