Trying to predict how AI will transform the investment industry? Look back to how computers changed the industry in the 1980s, posits an article in Morningstar. Back then, computers offered more information to portfolio managers, gave financial advisors software to manage their business, and provided researchers with better analytics. How will AI affect those three industry roles?
When computers began to dominate in the 1980s, “quantitative” investment firms became the hot trend, but their popularity was short-lived because soon every decent money management firm had their own computer system and databases. This will likely be the scenario with AI and professional money managers; anyone profiting from AI implementation now will soon become merely one of many. And since indexing is still the dominant strategy, active money managers don’t have much to lose. But while AI won’t damage them, it also won’t benefit them much.
While AI may be well-positioned to offer personalized financial advice, its functions are beyond human control and clients might not be willing to rely solely on non-human advice. Here, AI could be beneficial if financial advisors learn to harness its usefulness but, similar to active portfolio managers, they don’t face too much of a threat from the technology, the article contends.
However, AI could prove to be fierce competition to industry researchers. Investors only have so much time they can devote to digging into research, and they may find that the research provided by AI is more valuable than that done by a human. But though AI may offer more in the way of fact-checking and standard information, it won’t be able to provide the level of insight that comes from a human researcher. That could, of course, improve over time, at which point researchers may find AI to be a significant rival.
