In the rapidly evolving landscape of investment, artificial intelligence (AI) is emerging as a powerful force with the potential to reshape the roles of portfolio managers, financial advisors, and investment researchers. Drawing parallels from the computer revolution, we can attempt to predict how AI might impact these segments of the investment industry.
Portfolio managers, once boosted by supercomputers for quantitative investments, might find themselves in a similar cycle with AI. Emulating successful AI-driven strategies will lead to diminishing returns as share prices incorporate these advancements. Thus, AI may not significantly alter money management, and active funds might continue to underperform their benchmarks due to costs. The dominance of indexing leaves portfolio managers in a relatively safe position, with AI posing limited threats.
On the other hand, financial advisors face a different scenario. AI's ability to analyze data and make fast, tailored recommendations can complement their work. However, the challenge lies in tracking AI and ensuring its outputs align with clients' best interests. AI's potential to present its "reasoning" convincingly might lead to customer trust, making it a valuable tool for advisors catering to clients with unique needs or specialized research requirements.
The role of investment researchers is the most uncertain. AI presents a true rival to human-authored work. While AI delivers basic information and fact-checking, its insights may currently lack depth compared to those of genuine experts. Though AI could challenge commentaries that popularize established notions, original research and deeper analysis may still require the human touch.
Predicting the complete impact of AI on investment remains challenging, as it lies between the unpredictability of early internet predictions and the relative certainty of indexing's rise. While AI may not entirely replace traditional practices, it will likely play an integral role in shaping the future of financial advisory services.
The future of AI in investment holds both promises and challenges, and those who strike the right balance between human expertise and AI-driven insights are likely to thrive in this evolving landscape.