Editorial: Advances in Financial Technologies and Applications to Investment Solutions for Individuals

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Advances in Financial Technologies and Applications to Investment Solutions for Individuals

Maud Gauchon

 

 

 

In context of the fourth revolution – the digital revolution – which is expected to have a dramatic impact on the investment industry, four prominent academic institutions – EDHEC-Risk Institute, Korea Advanced Institute of Science and Technology (KAIST), Princeton University and Tsinghua University – renowned for the quality and relevance of their educational and research programmes in finance and technology, have joined forces. Together, they have been hosting a series of rotational conferences on financial technologies to offer a forum to facilitate discussion among all interested parties (academics, practitioners and regulators) from around the world.

After successful events organised in Princeton in 2017 and Seoul in 2018, EDHEC-Risk Institute is pleased to be hosting the "Advances in Financial Technologies and Applications to Investment Solutions for Individuals" conference, which will be held in Paris on 2 April 2019 at the Palais Brongniart – a flagship monument on Paris' historic landscape as it was the home of the French Stock Exchange for nearly two centuries. Attendees will have the opportunity to have informal discussions in the Espace Corbeille, which is harks back to the ambience of the original Stock Exchange. This new space, managed by our endorsing partner La Place, is the recently-launched Fintech meeting point for companies and organisations involved in the fields of banking, finance, insurance and technology, with the support its founding members, including the Louis Bachelier Institute, another partner of this conference.

 

 

Leading experts from the US, Asia and Europe will be featured at the conference, including, Lionel Martellini (Director of EDHEC-Risk Institute), Changle Lin (Adjunct Professor, Tsinghua University), John Mulvey (Professor and founding member of the Bendheim Center for Finance at Princeton University), Laurent Calvet (Professor at EDHEC Business School) and Woo Chang Kim (Associate Professor at KAIST).

 

 

Lionel Martellini, Professor of Finance, EDHEC Business School and Director, EDHEC-Risk Institute will give the first presentation of the day, entitled “Mass Production, Mass Customisation and Mass Distribution of Improved Retirement Solutions with Digital Goal-Based Investing Technology”. After several decades of relative inertia, a much-needed move toward dedicated investment solutions, as opposed to one-size-fits-all manager-centric investment products, has finally started. In his talk, Professor Martellini will provide news insights on the application of goal-based investing principles to the development of improved retirement solutions for individuals at various stages of their life-cycle. Lionel will also discuss the benefits and challenges related to the industrialisation of the production, customisation and distribution of these solutions via digital platforms.

This presentation will be followed by a talk from, Changle Lin, Adjunct Professor, Tsinghua University, who will present a paper entitled “Modelling Investor Behaviour Based on Micro-level Big data and AI Systems”.

Morning presentations will close with a presentation from John Mulvey, Professor of Operations Research and Financial Engineering, ORFE Department, Princeton University entitled “Decentralized Enterprise Risk Management: Optimal Capital Allocation for Global Diverse FinTech Organisations”. 

Capital allocation has become a central issue for the fastest-growing global firms. These Tech and FinTech enterprises are taking advantage of data, machine learning/AI, and efficiencies of scale to expand geographically and business-wise. Prominent examples include Amazon's purchase of Whole Foods in the U.S. and Alibaba's growth outside China. Building on recent advances in bank stress testing and factor investing, they develop a systematic framework for capital allocation and related investment decisions. The approach possesses strong convergence properties to optimality and provides information on coincident risks and related spanning issues via state prices, driven by a set of macro and micro factors across the firm’s diverse activities. The focus is to improve the probability of achieving the firm's goals, along with maximising risk-adjusted value.

After lunch, the speaker will be Laurent Calvet, Professor of Finance at EDHEC Business School. He will give a talk entitled What Do Large Datasets Reveal about Household Financial Decisions? Over the past decade, researchers have gained access to large datasets containing highly detailed information on the finances of every household in a country. Empirical studies based on a wealth of household-level data, such as demographics, income, taxes, pensions, financial assets, real estate, and private equity holdings, are providing an increasingly detailed understanding of financial decision-making. This talk will review what we have learned about diversification, risk-taking, portfolio rebalancing, saving behaviour, the risk and return characteristics of household balance sheets, and their implications for the dynamics of the distribution of wealth in society.

Then, attendees will have the opportunity to follow a multi-speaker presentation with Woo Chang Kim, Associate Professor, Industrial and Systems Engineering Department, KAIST and Head, KAIST Center for Wealth Management Technologies, Chong-Hyun Won and Min Jeong Kim from National Pension Service and Joohwan Hong from Veranos. They will give a talk entitled “Enhancing income security via financial technologies: Fully personalised GBI-based life-time financial planning service for every Korean citizen by National Pension Service”.

FinTech represents the main changes driven by new technologies in financial sector. One of the most notable changes is that the personalised life-time wealth management services that only high-net-worth individuals were accessible are now being available for everyone by reducing the costs of services with new technologies. More importantly, it has a meaningful impact on the social welfare, or the income security. As if the universal healthcare system has significantly contributed toward longer life expectancy of South Korea, enabling personalised life-time financial planning service for everyone will allow every single citizen to be actively prepared for their financial goals including the retirement needs.

In this talk, they will illustrate how to provide fully personalised life-time financial planning service for every Korean citizen. With a vision to enhance income security at the national level, they conduct a pilot study with National Pension Service (NPS). NPS, the third largest pension plan in the world, has more than 20 million participants, covering more than 90% of economically-active Koreans. To this end, they utilise goal based investing (GBI) technology. Their GBI model is suitable for personalised wealth management, which only requires a few intuitive inputs from individuals such as wealth, investment, and consumption goals. In particular, priority levels can be assigned to consumption goals and their model assures maximum probability of achieving higher priority goals in a holistic approach. Furthermore, their model, which combines multi-stage stochastic programming and goal programming, is formulated as a linear programming problem that efficiently finds the theoretical optimal investment decision. With its simplicity, flexibility, and computational efficiency, the proposed goal-based investing model provides a new framework for automated investment management services.

This presentation will be followed by workshops driven by Amundi and Samsung Asset Management.

The conference will close with a roundtable that will discuss “The Rise of Robo-Advisors: A Threat or an Opportunity for the Wealth Management Industry?” The panel discussion will be moderated by Yuri Bender, Editor-in-Chief, Professional Wealth Management, Financial Times, and will gather distinguished industry speakers, including Patrick Armstrong, Senior Officer, Financial Innovation, ESMA; Paolo Sironi, FinTech Thought Leader, Author of bestselling books about FinTech and Finance, and Elective Member of IBM Industry Academy, Zakaria Laguel, Founder and General Manager of WeSave, a leading French robo-advisor, Samsung Asset Management, Amundi and more other wealth managers to be announced. The roundtable will examine the following issues: Is the emergence of robo-advisors a threat or an opportunity for the wealth management industry? Do we expect welfare improvement from the individual investor standpoint in terms of cost, quality of service, both? How can an individual make an informed decision regarding suitable robo-advisory services for their needs? Can/should robo-advisors employ "big data" such as transactional and health information to improve the quality of their advice giving? What are the main privacy issues with the spread of robo-advisors?

The conference will include the participation of official partners Samsung Asset Management and Amundi.

Further information on the conference can be found in the programme.

Registrations for the conference are limited to 150 seats. To book your seat, please access the dedicated registration website. Should you need any help with your registration, please contact me at maud.gauchon@edhec-risk.com or on +33 493 187 887.