Is a machine up to the task of managing your money? A lot of venture capital money is betting ‘yes’ as more and more “robo-advisors” hit the market. Fascinating stuff, but the closer you look, the more algorithms, formulas and artificial intelligence come up short. Technology has a big role in investing, but there are still many circumstances when human touch and insight just can’t be replicated. Here’s a guide for managing your money in the robo age.
When technology is your friend
Technology is a huge help to us. Our largest single operating expense at Osbon Capital is our technology budget, much larger than our second biggest expense, our office. I use the word “technology’” as a catch-all for programs, computers, systems, links, APIs and databases. Technology is extremely powerful and helps us – and you, ultimately – by:
- Collecting and reconciling ALL your important investments and activities
- Handling mundane, repetitive tasks like recording complete dividend payment dates and amounts
- Creating complex ‘what-if’ scenarios based on changing personal situations or goals
- Monitoring risk limits via custom alerts
Technology saves time, increases accuracy and gives us a better view of your money. Computers do exactly what you tell them to do, undistracted by weather, sick days or emotions. We couldn’t serve clients without them.
What technology can’t do
Advances in technology continue to amaze, but are you ready for driverless cars in downtown Boston at rush hour? Computers can execute commands, but they still can’t think like humans.
For as much time as Max spends designing, operating and improving our technology, he can only describe or replicate a very small part of what people really need from their money. He usually stops programming after he enters six variables, exceptions, or substitutes, as we call them. Then we take over.
Take something as simple as cash. When a client needs cash, many questions quickly arise. What is cash? Drawn from where? When? How? With no tax effect. When it is not available right now, what then? Max and I will look at all the options in ways we could never outsource to a piece of software. It takes a human to understand and direct technology in service of the person, not the other way around.
Conversation first, technology after
Artificial intelligence, the most advanced form of technology, promises to make computers as interactive and intuitive as humans, but we’re nowhere near there yet. AI can be helpful if you are completely predictable, logical, understandable and never change your mind. Otherwise, watch out. Imagine trying to model and learn from a conversation with a person who, inside of ten minutes, changes her mind, discusses multiple conflicting ideas at once, speaks in slang, uses humor and says words like “red” and “read” – identical sound – in the same sentence.
The fact is, computers and programs are very poor at understanding human beings. They can’t hear what is unspoken, such as doubt, pain, curiosity or confusion. It takes a human to recognize these and give them appropriate weight. When properly guided, technology can do all the research, grunt work, formatting, sorting and calculating, but only with a human in the loop for judgment, asking the right, common sense questions.
Combining humans and technology for you
It’s too simplistic to say “I only talk to people” and “I hate this technology I don’t understand.” In truth, we need both tech and people. The combination expands available information and improves investment insight and understanding. Find out how your advisor combines the two for your benefit by asking:
- How much money do you spend on technology?
- Who makes the decision, you or the robot? Can you override the program?
- How can you show me information in the way I want to see it?
Make sure a human watches your investments, tends the robots and is available if you want to have a discussion. With technology and “humanology” combined in the right way, you are much more likely to reliably achieve your investment goals.
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.