How brokers are using AI and ML to offer tailor-made stock advice

Large players use these tools even to deliver data on stocks they don't cover; several use chatbots, Google Home and Alexa to improve customer experience

Artificial intelligence (AI) and Machine Learning (ML) are the new buzzwords in the broking community. Large brokers are using these technologies to help their customers make investing decisions and get personalised services of the kind offered by e-commerce giants such as Amazon and Flipkart.

Sample this: HDFC Securities uses AI to crunch numbers of all listed companies on different fundamental parameters and offers a score to customers to take a more informed call. “If a customer wants information on a stock that our research team doesn’t cover, the machines can still analyse the company’ financials and display results that are easy to understand,” says Nandkishore Purohit, head–digital business, strategy, HDFC Securities.

Alternative research is a small part of the AI and ML landscape. Stockbrokers are using the technologies to personalise client servicing to replicate a human relationship manager experience. Some, such as Axis Securities, see themselves as more as a fintech platform than a broking company. “In today’s era, when volumes are digital, there’s no face-to-face interaction with the client. Just like any fintech company, we offer a strong technology platform, easy user interface and user experience and personalised product,” says Amit Golia, chief business officer, Axis Securities.

Alternative research tools: Brokers like HDFC Securities, Axis Securities and Reliance Securities offer alternative means of research using AI, based on the recent quarter data. Apart from proving a score on fundamentals, HDFC Securities also offer technical calls that machines generate using recent news of companies. Axis Securities also provide data based on fundamental parameters of companies such as price-to-earnings, earnings-per-share, book value, and so on.

Reliance Securities provides sentiments (negative, positive or neutral) on a stock by tracking 1.5 million sources of information. “Based on the price and volume movement, the machines also suggest strategies to a day trader who uses technical analysis,” says B Gopkumar, executive director and chief executive officer, Reliance Securities.

Tailored for you: Most brokers using AI and ML are most focussed on personalisation. “Not all customers are same. We have identified clients in three buckets. Those who trade daily, short-term investors and long-term investors. Accordingly, we tailor our offering,” says Golia. Many other brokers follow a similar approach. The customer is segmented based on their past trades, and as the client changes the preference, the machine changes the profiling in real time.

Earlier, brokers sent all reports and calls to each client. As they can distinguish the transaction pattern now, only relevant recommendations are sent. If a person in a day trader, he receives trading calls accordingly. Similarly, if a person is a long-term investor, the trading calls are not sent. Instead, in-depth stock recommendations are given with a long horizon. Same goes for those who hold stocks for short- and medium-term.

Stockbrokers are also tracking usage behaviour on the platform and customising home screens and other offerings accordingly. After logging in, if a client first checks his portfolio, next time onwards his stocks appear on the screen. If he checks the status of an order, the same is displayed.

Then there are portfolio-specific suggestions and recommendations. If a stock in the client’s portfolio, for example, doesn’t have any upside left based on the broker’s research, an alert is sent giving alternative stocks in the same sector or category (large- mid- or small-cap) with research report. ICICI Securities provides real-time and periodic updates on companies that are part of a customer’s portfolio. 

“Retail investors, typically, don’t have the bandwidth to track corporate actions in all the companies in their portfolio. ICICI Direct, therefore, provides real-time and periodic updates such as the change in promoter holding, large transactions involving institutional investors, major price movements like 52-week high or low or 5 per cent or more movement of a stock in their portfolio,” says Vishal Gulecha, head – equity, ICICI Securities.

Talk, chat to order: Some brokers, like HDFC Securities, have integrated their platform with chatbot and also with Google Home and Amazon Alexa. A client can talk to the chatbot and execute trades and get the information he wants. Axis Security is awaiting approval to offer trading on chat services like WhatsApp. Using his credentials, a customer can start a WhatsApp session with a chatbot. He can then give specific commands to buy or sell stocks. The same facility can also be offered on Facebook Messenger.

Replacing relationship managers: A stockbroker may have a large client base, but the proportion of active clients could be low. Using AI and ML, they are able to increase the engagement from investors. Some customers just want to buy shares and keep them. They want the transaction to be similar to shopping on the internet – place an order, decide the quantity and pay. Brokers are trying to replicate this experience on their platforms. But there are many who prefer a relationship manager (RM), who understands their profile, availability, stock preferences and so on. “Using AI and ML we can take away the need for the customer to have an RM. A digital RM can be intuitive and free of human biases. Chatbots have already replaced many of RM's functions,” says Gopkumar. While AI and ML are easing trades for investors, the technologies are also are increasing business and saving costs for stock brokers.

India's top brokerages
Broker	Active clients
Zerodha	868,360
ICICI Securities	830,368
HDFC Securities	669,931
Sharekhan	528,983
Kotak Securities	424,024
Axis Securities	416,775
Angel Broking	413,156
Motilal Oswal Securities	322,042
Karvy Stock Broking	269,327
As on Jan 31, 2019; Source: NSE