In the future, companies will publish their ESG declarations and supporting supply chain information straight out into a blockchain. Those with access to this information will be able to see not only what a company is doing but how it is doing it, going beyond the traditional published profits and losses and into the chain of activities that make up the E, S and G.
Initiatives such as Tisa’s Universal Reporting Network are already looking to make the most of the enormous efficiencies and leap in transparency blockchain can bring for asset managers. In this case enabling participants in a transaction to gain access to the EU Mifid II template on an industry blockchain.
Analysing data
Blockchains public and private have the potential to create a shortcut in the traditional flow of information, from company to analyst to fund manager to financial adviser to client. New entrants who build these networks will leapfrog traditional players in the value chain.
The quantities of data here of course are vast, many orders of magnitude greater than those available to analysts today as value chain information becomes available from individual product and service lines.
The parallel development of artificial intelligence in asset management is already helping asset managers improve portfolio management, trading and risk-management practices, in part by gaining insights from data sets far larger than traditional analysis can cope with.
A paper by the CFA Institute found a sizeable number of asset managers are already using AI and statistical models to run trading and investment platforms.
At the bleeding edge of this trend are pure robo-asset managers such as EquBot ETF who claim to manage $2bn (£1.58bn), analysing 1mn new articles and data sources a day across 50,000 companies and asset classes and 169 ESG signals, all powered by AI from IBM’s Watson.
So, in this brave new world, what will be the role of financial advisers and advice be?
Firstly, let’s remember that it is entirely possible for investors to research and set their own investment strategies today – with greater or lesser success – but most people do not.
No matter how much information becomes available, most people need someone to help them focus on the future, think about the trade-offs of risk and return, and design a strategy.
Will that process change? Undoubtedly. Will there be a greater availability and need for tools and technology? Absolutely. But will we still need trusted coaches to help people make decisions? I am sure of it.
The caveat is that the appetite for look-through has already grown enormously, and it is only the beginning.
