Believe it or not, more people would be willing to let a robot perform heart surgery on them than allow one to open a savings account or provide mortgage advice.
While overall, it’s a small number of people who would trust a robot to do any of those things, the message is clear: people really want to feel like they’re in control of their finances.
Nonetheless, a wave of disruption is approaching the world of online investing. Fully 33% of millennials feel banks won’t be necessary in the near future. Another 73% are already looking to tech companies such as Apple AAPL, -2.56% , Alphabet GOOGL, -2.20% and PayPal PYPL, -4.02% for financial products.
More: Amazon checking accounts could have massive appeal for these Americans
Sooner than we realize, the intersection of consumer trust and technological disruption will meet, changing the way people manage their personal investments online forever.
Here’s a glimpse of what it may look like and why it’s important.
Virtual and augmented reality
By 2025, investment banker Goldman Sachs predicts virtual reality (VR) will be an $80 billion business. It’s a compelling number that will draw interest from a multitude of potential players.
Today, we are still in an experimentation stage in VR and augmented reality (AR). Applications are sprouting up like wildfire, but we still don’t know how different industries will successfully utilize this technology. How do we create movies that make sense in a VR setting? What about education, or shopping? These questions are just beginning to be explored, including in finance.
A decade from now, in the financial sector, we may be meeting with advisers — whether human or artificial — in a VR setting. From the comfort of your living room you might receive a detailed overview of where your portfolio stands, along with trends and statistics that are meaningful to you. The interaction will feel personal, and your adviser will feel human — even if they’re not — or at least, human enough.
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The rise of automation
What we currently call chatbots will be full-blown conversation bots in the coming years, able to answer complicated questions and even predict the answers we’re looking for.
Chatbots are already on the rise. This last holiday season, Amazon AMZN, -3.20% said it sold a record amount of its Echo home smart speaker. Apple and Google have joined the home smart-speaker game, where consumers can complete various online tasks simply by speaking.
While these devices are fairly simple today, it’s clear that this automation is extremely powerful. Rather than customers sifting through documentation online, having to visit a physical location, or spend time waiting on the phone, chatbots already provide nearly instantaneous answers to common questions, including around personal finances and investments.
TD Ameritrade’s Chatbot AMTD, -2.69% is a great example providing advice on investments and trading as well as video market updates directly to your mobile device. Meanwhile, Charles Schwab’s Alexa Skill SCHW, -4.28% is an innovative way to interact with an Amazon Echo device to learn about market conditions.
Over the last five years, robo-advisers have brought automated investing and rebalancing to the masses, allowing for a low-cost approach to asset allocation and tax harvesting — all driven by algorithms. The disruptive potential for these services has helped to push investment firms across the board to embrace automation, simply to stay competitive.
The promise of chatbots, robo-advisers and other intelligent financial software, is so powerful that in the next 15 years, KPMG’s Cliff Justice estimates that “45% and maybe up to 75% of jobs in the financial services sector will be performed by robots.” All of this automation adds up to enormous savings, as much as “75% for firms that get on board.”
While some might say they don’t trust a bot to manage any aspect of their finances, the promise of technology is too lucrative to ignore. If investment firms don’t embrace automation opportunities around online investing now, somebody else will.
Before we know it, automated and intelligent software will seamlessly provide personalized experiences to customers on any number of devices and in various media formats. And that is the future for engaging the millennial generation.
Humans are still really important
It might sound like a lot of people will be out of a job soon, but the truth is that automation will never completely replace humans. When major life events happen, like getting married, having kids, or a natural disaster, humans want to talk to other humans. Even with the advancement of AI, some open-ended questions and tasks that require subtleties simply can’t be handled by software.
User trust will grow as software begins to act more like humans, but widespread automation certainly won’t eliminate human advisers. In fact, it should enable advisers to do their jobs better. Rather than spending time digging through data, they’ll have it at their fingertips, able to make personalized, impactful recommendations to their clients at the press of a button.
Firms should also be able to handle more clients with automation — a good thing since the number of households with enough investable assets to require advice is already growing significantly faster than GDP, according to McKinsey & Company.
Everyone loves a good story
It’s clear that investment firms must embrace technology or risk being left behind. But what to do? The answer is deceptively intuitive: Tell a good story.
Building trust, being flexible, delivering multi-channel, personalized content — all of these things will be the norm, but the execution hinges on providing customers with information in a way that keeps them engaged.
Imagine a personalized snapshot of your investment portfolio delivered to your device of choice every morning — a computer, a phone, or your watch. It could be read to you, delivered to you by a virtual assistant, or as a ticker at the bottom of your TV screen. What will matter is the quality and accuracy of the story being told. You can have the flashiest, slickest VR experience on the planet, but if it’s not delivering meaningful content to the user, it will never be adopted.
Ten years from now, we’ll look back and think how archaic our online investment tools were and some big financial institutions of today will probably be among those nostalgic memories. But the institutions that embrace disruptive experimentation and utilize it to tell great stories about their client’s portfolios will be thriving in the online investment marketplace of the future.
Tim Burcham is head of product development at IHS Markit Digital .