Ray Bradbury, the famous author of Fahrenheit 451 was once quoted as saying:

“I don’t think the robots are taking over. I think the men who play with toys have taken over. And if we don’t take the toys out of their hands, we’re fools.”

His quote is the perfect encapsulation of the fears that many have regarding what the future may hold as man and machine try to find a way to work in harmony with one another. Are we truly headed down a path where we turn over many of our chores to robots? Perhaps. Is this a devastating turn for humanity? Maybe not so much. There are clearly advantages and disadvantages to relying on artificial intelligence so heavily, but there are many applications where it is clearly a net positive for the world.

Investing Enters The AI Age

Those who haven’t taken a hard look at the investing landscape lately may not have noticed that companies are starting to use artificial intelligence to help assist people who are asking questions about how to invest their money, or who are trying to learn more about certain products and services offered by a particular investment firm.

What Are Robo Advisors?

In the past when someone wanted more information about a particular investment that they were considering, they would go to their local stock market advisor for answers to their questions about a stock, bond, mutual fund, ETF, or some other investment that they might want to get involved in. They did this because society had agreed that there were certain people with the knowledge necessary to help others understand the risk and reward portfolios of these various investments, and which investments might be right for any particular individual. However, this was back in the time when most of the securities trading happened over the phone. Those days are now long gone.

Most investing these days is done online. In fact, there has been a spike in interest from retail investors (everyday people with accounts that are generally $1,000 or less in value) since the COVID-19 pandemic began. These retail investors are showing an interest in the markets, but they are also expressing an interest in making self-guided investment choices. Thus, the need for robo advisors.

A robo advisor may ask an investor a few of the following questions to determine what kind of information the investor needs to make their investment choices:

• What is your risk tolerance in the market?
• How much experience do you have trading stocks, bonds, mutual funds, and ETFs?
• What are your primary investment objectives?
• How comfortable are you being self-guided in your investment choices?
• How much do fees matter to your overall strategy?

Each of these questions is designed to glean certain pieces of information from the investor about how they manage their money and how they would like to balance their quest for reward against the inherent risks in the market. The robo advisor can then present the investor with some options that it has determined are likely to best suit their needs.

Are There Disadvantages To Robo Advisors?

It is certainly fair to say that not everyone is pleased with the changes that have come to the advisor world, and not just those who rely on this to make their money. There are a lot of investors, novice or otherwise, who are less than thrilled by the idea of a machine directing them about how to invest their money. They may feel that the interactions are too impersonal, and they are likely to see that the lack of human interaction means that sometimes things are lost in translation.

CNBC reporting reveals that while many Gen Z and Millennial investors seem to be fairly comfortable with the idea of skipping out on face-to-face contact with another person for their investment advice, this is not a universally shared sentiment. There are some people who just don’t want to give up the ability to speak with someone who understands their investment needs on a more human level. Sometimes, something as small as the pitch of one’s voice or the body language that one uses is enough to give an indication of what their true concerns are when investing. Obviously, there isn’t an artificial intelligence program that can pick up on signals like that. Thus, there is absolutely still a role for human advisors in today’s investment landscape, and it is likely to remain that way for some time.

Everyone should be aware that robo advisors are around and are making an impact, but no one should panic that they are going to take over the entire industry anytime soon.