You may have heard of IBM Watson already, but in case you
haven't: it's a cognitive computing capability that is
commercially available. Named after IBM's first CEO,
Watson beat two champions of the game-show Jeopardy
back in 2011, and more recently has spent some time watching popular films, even
making the astute observation that Han Solo is among the most neurotic of
characters in the Star Wars universe, suggesting
that underneath the cool exterior is perhaps a more complex
constellation of emotions—I don't think he's wrong.
(He also had opinions on the Harry Potter series).
But of course, plenty of people have plenty of plans for the
intelligent robot outside of TV and film. Blockchain enthusiasts
will be happy with the news that Watson could potentially enable
regulators to easily find anomalies by having Watson scan
huge volumes of past transactions or even help devices that use
distributed ledgers self-diagnose errors. These applications are
perhaps just the beginning, with Tim Hahn, IBM's chief
architect in charge of Internet of Things security, suggesting that
we're starting to approach "the kind of things we see in
In effect, what Watson does is analyse unstructured data, i.e.
data that wasn't produced specifically to fill in one field of
one form: articles, books, tweets, quotations, laws, speeches,
commentary, and every word I'm writing right now. IBM's
website says that 80% of all data out there is unstructured,
which Watson combs through using natural language processing (NLP).
NLP means that he deconstructs every word, phrase, sentence, and
paragraph, runs tests to statistically determine what the intended
meaning is, and then can use that meaning for whatever analysis you
fancy using it for. It was, therefore, only a matter of time before
somebody plopped him down in front of the original Star
But naturally we're also interested in what Watson's
intelligence could do closer to home, specifically in the audit
business. Since Watson can read vast amounts of a company's
unstructured data, he could help auditors identify anomalies,
expand their ability to test those outliers, and generate evidence
that will support or contradict an audit opinion. In short,
patterns will be findable that were never findable before, and
quickly too. I'm picturing Neo decoding the avalanche of
green symbols in The Matrix, and I think that 1999 us
would be proud (uh, jealous) of what 2016 us are on the brink
Not to sell Watson short as merely some sort of powerful search
tool, I must also emphasise his intelligence—he simulates
decisions and learns in the style of a human, generating hypotheses
before evaluating the supporting evidence and arriving to a
judgement-based decision. (That's how I do it anyway).
I am quite pleased to say that the "Watson could"
statements in the previous paragraphs are not pie-in-the-sky
potentialities or theoretical verbiage. KPMG has recently expanded
its relationship with IBM to start using Watson to turn ideas such
as these into reality. We are secretly hoping that more Neo-like
film characters will be auditors and financial professionals, but,
failing that, we are keen to see the financial industry start
offering the capabilities that science fiction promised us when we
What other robots have you got?
As you are probably well aware, the asset management industry is
being disrupted by robo-advisors that use analytics to generate
financial advice—many of them are even using NLP to do so.
The opportunities in this area are nearly limitless, with the
obvious ones being lowering fees around investment management, and
allocating assets in a truly unbiased way when selecting funds
based on defined criteria.
A recent KPMG survey found that 80% of millennials and
generation Y are "very likely" to rely on robo-advisors
to make financial decisions. Picturing banks using social media to
detect changes in their clients' lifestyles and suggesting new
investments as a result is hardly sci fi... it's a reality.
Indeed, some have even argued that
robo-advisors have gone mainstream.
Want to chat robots with a drink in your hand and sand under
your feet? Come to KPMG Luxembourg's Digital Fund series:
Cabanon edition where the topic will be Robo-advisors: a no
brainer for asset management? More details on the event
can be found here.
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25 Apr 2017, Business Breakfast, Luxembourg, Luxembourg
KPMG Luxembourg is pleased to invite you to a networking breakfast for Family Offices and Private Bankers. On this occasion, we will present the latest developments around hidden profit distributions to non-shareholders.
Here in Luxembourg, LPEA are holding an event which will offer new initiatives by bringing General Partners (GPs) and Limited Partners (LPs) together to examine and speak on the industry from the “360” perspective, leaving no stone unturned. We are a sponsor of the event, as well as having a speaker present. David Capocci, Partner and Head of Alternative Investments will be offering his own insight on the industry nowadays.
The conference will centre on the new tax normal, full transparency, and specifically the role of private bankers in this new age. Originally perceived as a threat to existing business models, full tax transparency may actually hold new opportunities for private bankers.
With effect from 18 April Jersey is introducing a new regime in respect of private funds - simplifying the regulatory regime, and extending the benefits of flexibility and speed across Jersey's private funds space.
The Hedge Fund Law Report recently interviewed Woolverton in connection with his move to DMS, during which he discussed the role of robust fund governance in the context of private funds.
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