AI: Coming to a Portfolio Near You
Imagine calling an 800 number and not getting frustrated. Trains run on time. Waiting rooms are considered archaic. People and corporations are taxed at the perfect rate. And everyone will have enough money to retire, because, in the future, artificial intelligence will make managing your finances—and your life—as easy as pouring a bowl of cereal.
Long the domain of apocalyptic science fiction movies, artificial intelligence has already stepped off the screen and into real life in subtle ways—and it’s about to hit your portfolio. Ask almost any money manager what they’re most interested in these days and it’s not proselytizing new investing styles—it’s artificial intelligence. Artificial intelligence is the ultimate competitive edge. It has the potential to deliver an infinite workforce that never tires and virtually never makes mistakes. Can AI save the beleaguered asset management industry? Could it make investing even easier, cheaper, more effective? The biggest fund firms have been spending billions to find out.
BlackRock, Vanguard, Fidelity, and T. Rowe Price, among others, have all invested time and money setting up tech centers in major cities, apart from their headquarters. BlackRock’s digs are in Palo Alto, Fidelity’s in Boston, Vanguard’s in downtown Philadelphia, and T. Rowe Price’s in New York City—all satellites designed for a very specific set of people and type of work in mind. They are outfitted with standing desks, mock-garage project rooms, shag rugs, Christmas lights, puzzles, Kit Kat bars, and LaCroix soda—more start-up chic, less grandfather’s mahogany and leather. It’s part of the effort to draw the best minds, data scientists, information architects, and algorithm wranglers otherwise headed to Google or Amazon.
“We are in a technological arms race,” says Andrew Lo, director of the Laboratory for Financial Engineering at the Massachusetts Institute of Technology. “Financial institutions have to participate just to keep up with the competition.”
What are they competing for? Cost savings, for starters—anything to offset the shrinking margins as investment products get cheaper and cheaper. AI, done right, could also give portfolio managers an edge, and better serve investors with a wider array of financial planning tools that make today’s robo-advisors look like an abacus. “Every major CEO of every major company is bullish on AI. Everyone is chasing the nugget of gold,” says Vipin Mayar, head of Fidelity’s AI initiatives.
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