Tuesday, April 22, 2014

Wealth Management: Are Robots Better Than People?

Actually, in many important ways, they are.  Robots aren’t (yet) emotional and most of the common, predictable but seeming unavoidable investing errors human beings make are caused by emotional reactions to market movements.  On the other hand (sorry, no easy answers), investing cannot be completely quantified.  No algorithm can design the perfect investment strategy – even for a single person, let alone hundreds of thousands of people.  The only bottom-line at this point is to watch this space: the wealth management industry (RIAs or Registered Investment Advisors) is so ripe for disruption and disintermediation, it’s virtually falling off the vine.  Especially for non-multi-millionaires, services by the traditional brokers, banks, wealth managers and RIAs is often of questionable value, often for onerous fees, often incomprehensible to the client.  So on balance it is great that venture capitalists see this as a great space to risk their capital.  They’re going to lose lots of money but hopefully the world will benefit from it.

The following is an excellent review of some of the major pros and cons of what the author checkily calls, “robo-advisors”:

4 Things To Know About ‘Robo-Advisors’ http://www.etf.com/sections/features/21828-4-things-to-know-about-robo-advisors.html?fullart=1&start=5

 

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