Artificial intelligence and machine learning are still a couple of years away from being really useful in financial planning, according to Tony Stich, director of global marketing at Advicent, a financial planning software provider. He noted that the technology is not intuitive enough yet for advisors' purposes. First, Stich believes, the "third wave of the internet will really hit the fintech space."
The "third wave" refers to the ubiquitousness of the internet: the Internet of Things, for example.
"Over the next decade and beyond," Steve Case, co-founder of AOL, wrote for the Wall Street Journal in an April 2016 op-ed, "the Internet will rapidly become ubiquitous, integrated into our everyday lives, often in invisible ways."
Case's book, "The Third Wave: An Entrepreneur's Vision of the Future," was also published in April.
That third wave entails a "more seamless communication between technology," Stich said. "Consumers and advisors are going to expect more instant communication between the technology stacks: That's CRM talking to financial planning software. That's risk tolerance software talking to CRM. We're going to see more of that before we see AI really taking shape."
More integration and communication between systems puts more pressure on firms to have effective cybersecurity prevention and response plans to address cyber risk.
"As these communication channels begin to open, it's much more important that we are vigilant in our security methods," Stich said.
He predicted there will be an increase in discussions about the role of governing body to oversee APIs and other types of seamless communication used by different technologies.
"Right now, there is no regulation. The communication channels, that application program interface or API, are not regulated. There are no cybersecurity requirements to communicate between two technologies, and many technology folks are beginning to start asking those questions."
The first step may be agreements between different technology providers that set a cybersecurity baseline before integrating with each other. Providers "might say, 'Hey, if you want to talk to our technology, you have to follow these guidelines. These cybersecurity needs must be met prior to communicating with us.'"
A governing body that addresses cybersecurity may not necessarily be a regulator, but may take the form of a non-profit or a consortium of large firms that create guidelines for firms, Stich said.
Financial Innovation Now is one such consortium, comprising Amazon, Apple, Google, Intuit and PayPal. It calls for a principles-based standard for protecting consumers' financial information rather than adopting a dominant technology.
The National Institute of Standards and Technology, part of the U.S. Department of Commerce, released a framework in 2014 outlining industry standards and best practices to help firms manage cybersecurity risks. An updated version of the framework is expected in early 2017.
