Machine learning and artificial intelligence are transforming nearly every aspect of the financial services industry, with companies that offer data-centric and machine learning-related tools changing how trillions of dollars are managed worldwide. As investment models increasingly depend on data, key players in the industry are discovering the value of using artificial intelligence. The expansion of AI is defining a new market dynamic primed to transform the financial services industry, and ultimately the broader economy.
Boosted.ai and Barclays Rise recently convened a panel of AI experts for a virtual webinar, “Machine Learning and AI: An Investment Perspective,” to explore the potential of artificial intelligence and machine learning today and evaluate the regulatory concerns that inevitably arise with the introduction of new technologies.
Julie VerHage-Greenberg, Co-Founder of FinTech Today, moderated the lively conversation between Josh Pantony, Co-Founder and CEO of Boosted.ai; Melissa Koide, CEO of FinRegLab; Jeremy Schwartz, Executive Vice President and Global Head of Research at WisdomTree Asset Management; and Daniel Huss, Founder of gravityAI.
From this discussion, we noted three key takeaways on the future of AI in finance and evaluated the potential regulatory challenges that may come with the explosion of these technologies.
Explainable AI and the Potential for Regulation
The consensus is that machine learning techniques will play a significant role in the future of active management, stock prediction and risk mitigation.
The introduction of these technologies also prompts questions around the level of oversight involved. Melissa Koide of FinRegLab noted that regulators are no longer accepting ‘black box’ tools that fail to link decisions back to the human, while Jeremy Schwartz of WisdomTree Asset Management explained that the biggest challenge he sees in AI today is understanding the intentionality behind decisions generated by machines.
In our unique position linking finance and machine learning professionals, Boosted.ai sits at the frontier of this new investment landscape of explainable AI. While we haven’t seen AI bubble up to the level of financial regulators yet, we’re setting the stage by creating an interpretable system that removes the ‘black box’ effect and allows individuals to understand the machine’s decisions.
Bias and Ethical Implications of Data
Another point that surfaced in the discussion is the role of ethics and data.
At Boosted.ai and as an industry, we are working to ensure that artificial intelligence is a tool that moves us forward in our capabilities. However, the systemic bias inherent to data collection raises an essential question about the ethical implications of data.
Daniel Huss of gravityAI provided an example of the risks associated with these tools, stating that if the core factor in an investment strategy is sentiment analysis, there is the capability to create a bot that can manipulate sentiment and therefore impact the data injected into the model. This raises a concern about the safety of data and how reliant we can be on data that is open to manipulation. Boosted.ai mitigates these concerns through models that separate the process of signal generation from portfolio construction, eliminating the risk of manipulation and ensuring that bias is not reflected in our models.
The Future of Machine Learning and AI
While machine learning and AI are some of the most trending topics as of late, the panelists agreed that we must be careful when looking at what the future holds for these technologies in the financial services industry.
From advocating for the responsible use of technology in the financial sector, to providing a marketplace for that technology, to putting it into investment practice, each panelist brought a different viewpoint and area of expertise. We were able to step away from the conversation with a consensus about the benefits these tools will bring to the industry and the concerns that must remain top-of-mind moving forward.
As a machine learning partner for financial services firms, we see Boosted.ai’s role as helping to move the industry forward by building an explainable platform that allows the financial sector to evaluate risks, uncover new opportunities and leverage data through a human-plus-machine approach of quantamental investing. To watch the full webinar, click here.