Written by Artificial Intelligence is rapidly becoming an intricate part of our lives. I wake up in the morning to check Facebook, like everyone else, and see a personalized news feed based on my interests. I turn on Spotify, and I am served a playlist of songs that I haven’t heard, according to my listening history. This is all within the first 10 minutes of getting out of bed. Now, imagine all the other instances where AI is present, yet unnoticed. How will this shape the financial industry and the way we manage personal finance? From banking to wealth management, the answer can be staggering.
Personal Finance
Walk into most banks, and you will now be greeted by automated tellers that are able to read handwritten checks and give exact change. Download an app like Mint, and you will be given an alert when you have gone over your budget or spend abnormally. The app Acorns can even predict future spending habits and income, based on your history. Sounds innocent to me.
Wealth Management
Let’s look at how AI has effected wealth management. Robo advisers were first established in 2008 to provide balance to investor assets within target funds. They now have the ability to perform basic functions of Financial Advisers including passive investing, which keeps the amount of buying and selling to a minimum. Could AI move into the active investor role, making specific investments with the goal of outperforming a benchmark? This is exactly where it’s headed.
Traditionally, investing has been about gathering information through news outlets, company filings, and industry experience to take advantage of market inefficiencies. AI is at the forefront of being able to capture and understand the large volume of complex data that surrounds us daily. It will be able to identify predictors that can be used to create and evaluate profitable strategies. How does it do this?
- By searching the internet for the use of a company name within social media, blogs, search engines, as well as scouring social investing sites to gather the general sentiment of a stock.
- Also, by utilizing computer vision models to interpret satellite images of retail store parking lots into revenue estimates.
This is just the tip of the iceberg. It’s all powered by self-learning software that is able to gather data and continuously improve its performance. At some point, AI will be equal to human intelligence, with the most conservative experts saying this will happen before 2075. Okay, I’m nervous now! Check out what the experts are saying at one of my favorite blogs, “Wait But Why.”
AI could reduce emotion and volatility in portfolios, which often costs investors. The savvy investor will be able to incorporate AI into their decision-making process without putting it into the driver’s seat just yet. We are still in the early stages with a lot of issues to be ironed out, so be cautious. Needless to say, the future has arrived. Let me know how AI is shaping your financial life in the comments below!
Michael D. Gould 