Does generative AI serve investors?
Generative AI has been all the news during most of 2023. It might surprise investors to know that AI has been embedded in financial services for longer than they may think. In a CNN article “Machines are driving Wall Street’s wild ride, not humans” dated February 6th, 2018, the author cites that on any given day computers account for 50-60% of trades and perhaps up to 90% during high volatility. The author goes on to say: “the problem with that is everyone’s algorithms are pretty much the same.” If everyone’s algorithm is the same; can algorithms serve investors individual needs?
In another more recent article on Morningstar on September 118th, 2023, titled “Not all robo-advisors are created equal”, the author tried 7 different platforms. Their goal had been to compare 20 platforms, but the system wouldn’t allow the “investor” to see how their money would be invested without an account in 13 of the platforms. Hence, no “try before you buy” option was available.
The goal was to better understand how robo platforms can serve different investors with different goals. One profile input was a 30-year-old investor who wants to accumulate $50,000 for a down payment in seven years. The second profile outlined a 40 year old wanting to accumulate $1,000,000 for a retirement in 25 years. The risk profile for the two investors was similar, a middle of the road risk tolerance.
And the results? Four of the seven robo advisors recommended the same EXACT portfolio in both scenarios even though the two investors varied significantly, and in particular there was an 18 year time difference for the goals stated.
In the coming months; we are going to share additional information about challenges we are seeing with algorithm platforms, and why we believe each family’s unique situation is better served by plans that serve their unique needs.
Orchestrating Fiscal Harmony™,
Kelly Kunst CFP®
2023 Five Star Wealth Manager
Click here for additional information and disclosures regarding this award program.
Once again, I am honored to be named a Five Star Wealth Manager by Texas Monthly. Nearly 4,000 Dallas-Fort Worth wealth managers were considered for the award; ten percent of these candidates were named 2023 Five Star Wealth Managers. Being recognized is always nice, but the real blessing is serving families and helping them on the path to Fiscal Harmony LLC in their lives.
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