The Birth of the Super Investor?
Some Hedge Funds and most banks use algorithms to automate their investment processes. These technologies where developed by an elite group of practices because it was more efficient. With laws and technologies fostering innovation and mainstream adoption, we are witnessing a perfect storm favoring startups who are creating financial applications that use artificial intelligence to improve financial performance.
Case in point, SEC Commissioner Kara Stein thinks that technology is forcing the SEC to rethink fiduciary laws to allow more of these innovations to compete in the real world and to set guidelines to protect investors against possible abuse.
VCs are preparing for this change and are making strategic bets in the Fintech sector. They believe that it is only a matter of time before artificial intelligence takes an active role in helping Americans manage their financial assets.
It's already here
Startups like Wealthfront, Betterment, RobinHood, Stash, Kapital, Acorn and Raft understand this opportunity and are leading the charge to change one of the most regulated sector of our economy.
The reasons why these startups are so popular points to big inefficiencies in the financial sector under current laws. Basically, technology does a much better job at managing assets than a human investor can. VCs and the SEC are well aware of this and predict a big shift of assets towards these more efficient solutions.
For smaller investors, super investing means more control and performance. Investing will be simplified to a few clicks and become a commodity. Once they start using these new efficient solutions they will gladly leave their traditional advisory practices behind because of the performance gain they provide.
For startups in the Fintech field, the current inefficiencies are opportunities. Focusing on user value will lead to innovations that have the potential to create a massive shift in wealth management. Law changes permitting, we are about to witness the beginning of a transformation perhaps as big as the advent of online brokerage itself.