From smartphones to driverless cars, doors to endless possibilities have been opened through technology. It is no surprise then why this era was dubbed the ‘Technological Era.’ But of course, being in the Technological Era presents its fair share of challenges and fears.
One big fear is that we would end up in an Automation versus Humans situation. For instance, many believe that with robotics and artificial intelligence (AI) development, human labour will be entirely replaced soon. Unemployment rates will shoot up, and disaster ensues. This was reflected in a Pew Research Center survey conducted across 10 countries (both emerging and advanced economies) in 2015.
Source: Pew Research Center
Amongst the 10 countries surveyed, most agreed that automation would transform our workplace by 2065.
Whether it was an emerging or advanced economy, more than half of the respondents expressed fears of getting displaced. This sentiment was more vigorous in countries like Greece (52%), South Africa (45%), and Argentina (40%). Workers in those countries strongly believed that they would get displaced due to automation sooner or later.
Meanwhile, an even higher proportion of respondents were convinced that automation would bring about more pitfalls than workers’ opportunities. Examples of some pitfalls are as follows:
- Ordinary people will have an increasingly more challenging time finding jobs.
- There will be an expansion of the inequality gap between the rich and poor.
- Very few better-paying jobs will be created.
Yet as a society only seeks to progress and grow, the move to automation seems almost inevitable.
Fast-forward to 2030
How long do you think we will work in 2030?
McKinsey’s research revealed that we might be working just 70% of the time. They found that 30% of the global work hours can be automated by 2030 (depending on adoption rates). Even in 2020, half of all paid social work can be automated using currently available technologies.
Even so, all these are just predictions. Many factors affect a person’s decision to automate. It varies according to the country and sector — some are more susceptible to displacement than others.
I would be lying to say that people will not get ousted at all. Estimates have predicted that robots could replace 400 million to 800 million people by 2030. Of the total number supplanted, 75 million to 375 million individuals would need to learn new skills or switch occupational categories.
Although the threat of automation is accurate on the brighter side, it can only eliminate a limited number of occupations. It is more of a case where work will be transformed, depending on the role’s nature.
Technical feasibility is also known as the % of time spent on activities that can be automated by adapting currently available technology.
Looking at the graph above, we see that not all occupations are susceptible to automation. It boils down to the scope of work. Even if tasks are being automated, it doesn’t necessarily mean that the demand for that occupation will decline. Instead, workers will need to learn new skills and perform new tasks that can’t be automated.
There are several cases where automation was integrated into tasks, yet overall demand for that occupation continued to grow. This was seen in the case of the supermarket or retail barcode scanner. Introduced in the 1980s, it reduced labour costs by approximately 4.5% per store. However, supermarkets’ employment rates continued to climb at a constant of 2% or more between 1980 – 2013. Why? Because cashiers were still needed. Scanners were just an additional tool to improve efficiency, which translated into more sales.
What Kind of Work is Most Susceptible to be Automated?
What work would be the most (and least) susceptible to automation then? The answer is that jobs in predictable environments would be most vulnerable, and vice versa (i.e. works in unpredictable environments the least).
The reasons are presented in the table below:
We can expect many workers in the manufacturing industry to be displaced because 59% of all manufacturing activities have the technical potential for automation.
Additionally, automation has evolved beyond just machines in manufacturing. Payroll processing, calculating material-resource, and administering procurement are more examples of what has been automated too.
Through machine learning and AI, technology now possesses the capability to transform the healthcare and finance sectors.
Even though you might argue that financial service firms rely mainly on professional expertise and knowledge, studies tell us that 50 per cent of overall work hours are spent on repetitive tasks such as collecting and processing data. Activities like these definitely can and will be, automated to ensure that financial advisors can focus on higher-value skills.
A Shift in Skills Demand
The acceleration of automation is correlated to the demand for workforce skills according to a few factors. McKinsey launched a study projecting the need for these skills by 2030.
The skills were split into five categories:
- Physical and Manual Skills
- Basic Cognitive Skills
- Higher Cognitive Skills
- Social and Emotional Skills
- Technological Skills
The most demanded skills are:
- Higher cognitive skills
- Social and emotional skills
- Technological skills.
Despite being the smallest category today, technological skills are expected to grow by 55% by 2030 and make up 17% of the working hours. Moreover, demand for social and emotional skills such as managing people and leadership will rise by 24% and make up 22% of working hours. Finally, the need for higher cognitive skills will grow moderately at 8% over the next ten years.
On the contrary, we will observe a decline in basic cognitive, physical and manual skills. As repetitive tasks, they can be easily automated and thus, considered as lower-value tasks. Even so, they will remain the largest category of workforce skills as the rate of adoption varies between countries and sectors.
The shift in skills is nothing new — the skills requirement has continuously changed since the first industrial revolution. As technologies transform the nature of work across industries, job scopes will adjust accordingly. It opens up doors to a vast array of opportunities for people to explore.
“This journey of transformation can also be a journey of growth for our businesses and people alike.”
– Mrs Josephine Teo (Singapore’s Minister of Manpower)
Zoom into the Financial Sector
The financial service industry is one where transformation brings about many opportunities. Many industry players have invested enormous amounts into new technologies. As a result, it enhances their competitiveness and operating capabilities.
Financial advisors are still spending the majority of their time collecting and processing data. These low-value tasks can easily be automated with the help of AI and technology. With this, financial advisors can shift their focus to higher-value work and ensure the highest quality service delivery.
Some firms have already moved to transformation, resulting in a shift in demand for workforce skills specific to the financial sector. As of 2018, the 5 most in-demand skills in the fintech industry are:
- Blockchain & Distributed Ledger Experts
- Programming Skills
- Machine Learning, Artificial Intelligence & Deep Learning
- Cybersecurity Expertise
- Soft Skills
Now, if we categorize based on the general five workforce skills:
As expected, the demand correlates with McKinsey’s predictions. 3 out of 5 of the most in-demand skills are technology-oriented, while the other two require higher cognitive and social, and emotional skills. This proves that the demand for lower value skills is becoming obsolete.
Although some may perceive this as a warning light, others see potential. This highlights an opportunity to automate low-value tasks and focus on higher-value activities.
Digital Transformation: Now or Never?
It doesn’t have to be an either-or situation: automation AND humans can work together, in harmony, to deliver the best of both worlds. For example, you could consider implementing a wealth tech solution that will enable your financial advisors to be more efficient. Robotic Process Automation (RPA) is one technology that allows you to streamline operational processes with Robo-advisors that will help better financial advisory for your clients. Therefore, the time for digitalization is now.
Leveraging technology to allow your advisors to focus on higher-value tasks will lead to an improvement in their skill sets, further setting your organization and staff up for long-term success.
Don’t know where to start? Well, look no further; Bambu has just the solution for you.
At Bambu, we specialize in developing Robo-advisory solutions for the financial services industry, from smaller RIAs and wealth advisors to some of the largest banks in the world. We help our clients work through the above vital considerations to implement solutions that genuinely benefit their wealth management business.
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