Retirement Isn't Linear: Mapping the Future with Big Data & Big Data Analytics

transcript

RETIREMENT ISN’T LINEAR: MAPPING

THE FUTURE WITH BIG DATA & BIG

DATA ANALYTICSDR. ANAND RAO, PWC@AnandSRao

• Retirement isn’t Linear

– Life Expectancy Increase is not linear

– Medical advances are not linear

– Technology acceleration is not linear

– Artificial Intelligence progress is not linear

• Hype and Reality of Robo-Advice

• Future of Advice

– Assisted Advice or Autonomous Advice

– Art of the Possible

• Key Takeaways

Executive Summary

Life Expectancy has almost doubled in 100 years….

3Source: World Climate Report, March 17, 2011

…but exponential rise considering a longer time frame

4Source: Life Expectancy, Max Roser, in OurWorldInData.org, 2015

Has the increase in life expectancy plateaued?

Will we see another doubling over the next 100

years?

Medical advances are not linear…

Source: "DNA Sequencing Costs“, National Human Genome Research Institute, available online – http://www.genome.gov/sequencingcosts/

Revolution in personalized medicine….

Source: The new frontier of genome engineering with CRISPR-CAS9, Doudna and Charpentier, Science, Nov 2014

Source: Organs-on-chips emulates human organs for better biomedical testing, The New Stack, 2015

Life expectancy in the Future – Linear or non-linear ….

Source: National Geographic, May 26, 2013 Source: Time, Feb 23, 2015

11Source: "Average Annual Expenditures of All Consumer Units by Race, Hispanic Origin, and Age of Householder: 2009" - U.S. Census, PwC Analysis

Household retirement income and expenses rise and fall in a

nonlinear fashion…

12Source: "Average Annual Expenditures of All Consumer Units by Race, Hispanic Origin, and Age of Householder" - U.S. Census (1999,

2009 Data), PwC Analysis

Rising expenditure on healthcare…

* Households headed by individuals 65 years or older

MORE OF US

LIVING LONGER

LIVING HEALTHIER

& SPENDING MORE

Summary of Demographics …

14Source: “The Singularity Is Near: When Humans Transcend Biology”, Ray Kurzweil (2006)

Technology acceleration is also not linear

Hype & Reality of Artificial Intelligence…

2004: CMU Red Team (DARPA Challenge) 2014: Google’s Autonomous Car

1984: Neural Nets - backpropagation

2014: Deep Learning

Source: Facebook's DeepFace Software Can Match Faces With 97.25% Accuracy, Forbes, March 18, 2014.

Source: The Current State of Machine Intelligence, Bloomberg, December 11, 2014

Hype & Reality around Artificial Intelligence

Reality of Robo-advisors… Large valuations

$500M of VC

funding

Reality of Robo-advisors… Advisor & Institutional

$2 Trillion in e-advice by 2020

Evolution of Robo-Advisors

Standalone

Robo-advisors

Self-directed

consumers

• Aggregation

• Trade execution

Integrated Robo-

advisors

Advisors and

End Consumers &

Providers

• Retail & Institutional

products

• Assisted Advice

• Predictive models

Cognitive Robo-

advisors

Advisors, End

Consumers &

Providers

• Economic & market

outlook

• Enhanced & Holistic

Advice

• Machine learning

• Agent-based

modeling

Future of Advice – Deep Learning

Keywords at Intersection of Technology and Finance:

• Artificial intelligence

• Interactive marketing

• Entrepreneurial

• Digital marketing

• Software vendors

• Next generation

Artificial intelligence and cutting edge technologies are becoming

more central to the financial advisory service

Financial Advice Concepts

Next Generation Technology Tools and

Concepts

Keywords at Intersection of Technology and Finance

Traditional Industry-Wide Technical Competencies

Comparison of investment strategies and products:

Retirement planners mostly focus on options for retirement savings plan or annuity products

• Retirement savings plan

• Annuity product options: e.g.: Guaranteed Minimum

Withdrawal Benefit (GMWB)

Future of Advice – Deep Learning

Fund managers opt for riskier financial products such as Exchange Traded Funds or other index funds

• Exchange Traded Funds (ETFs)

• Other index funds that follows broader market

Future of Advice – ‘SimCity for Advice’

Future of Advice – ‘Data Enrichment and Synthetic Data sets’

“Large and Incomplete” – Many records, few fields (e.g. client data)

“Small and Detailed” – Few records, many fields (e.g. SBI Macromonitor, Census micro

sample, Consumer Expenditure Survey)

Synthetic Household Population

Client account balances & product details

Basic demographic information

Rich transactional data

Detailed demographic information

Complete household balance sheet

Rich behavioral & attitudinal data

Full household dataset with realistic

distributions both across and within

households

$175,000

Future of Advice – ‘Clients like you’

• Auto-fills missing/incomplete data for “clients

like you”

• The ranges narrow as more data becomes

available

$175,000

Future of Advice – ‘Retirement Heatmap’

• RIIA segments and fundedness

• Future projection of HHBS

Future of Advice – Scenario Planning

Cradle-to-grave planning

Individual scenarios

Financial Advisors

• Focus on client relationship and advice – not on client

administration and data gathering

• Be the trusted advisor – not a product seller or product advisor

• Extract insights from tool and personalize the advice

• Machines are coming – ‘Don’t resist them – embrace them’

Financial Service Providers

• Focus on understanding customers and their latent needs

using data and analytics

• Recognize and embrace digital channels as part of an omni-

channel approach to serve all segments cost-effectively

• Start with the questions that need to be answered/decisions to

be made – not with the ‘big data’ that you can get

• Start small – test and learn – scale and deploy data and

analytics solutions

Retirement Isn't Linear: Mapping the Future with Big Data & Big Data Analytics

Economy & Finance