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Artificial Intelligence Is Part of Our Everyday Lives, Including Our Finances

by on April 15, 2018 5:00 AM

By Brittany N. Cox, Registered Investment Advisor at Nestlerode & Loy Investment Advisors

I’m sure you have noticed the abbreviation “AI” in the news quite frequently lately. I thought it would be beneficial to discuss what AI is and how it may be used in ways you didn’t realize, like your finances.

AI stands for artificial intelligence, which is defined as “the theory and development of computer systems able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.” Artificial intelligence makes it possible for machines to learn from experience and perform human-like tasks.

What is AI being used for? When they hear the term, most people think of jobs lost to technology or the army of automatons who take over the world in movies. However, artificial intelligence is not that scary. Two AI applications you’ve probably heard about recently are driverless cars and Apple’s facial recognition built into the iPhone.

What you probably didn’t realize is that AI is used on a much smaller scale, too, and you are probably already using it in your everyday life. Things like the spam filter on your email inbox, mobile banking deposits on your phone, Facebook automatically tagging your friends in a photo you post, or using a Snapchat filter. Also, when you search Google for “where to buy a couch” and for the next three months you see nothing but ads for couches on the side of your screen, you can thank AI in advertising.

Financial institutions are increasingly using artificial intelligence in a range of applications across the financial system, including access to credit quality, pricing insurance contracts and automating client interaction. In financial services, broker-dealers and other firms are using AI to find signals for higher uncorrelated returns and optimizing trade execution. It also is being utilized to detect fraud and for compliance purposes in the financial industry.

A large trend in brokerage firms has been so-called “robo-advisors,” which use artificial intelligence to provide investment advice by analyzing how clients spend, invest and make decisions to customize the advice provided to their clients. It will make decisions in portfolio management and rebalancing by analyzing the portfolio, risk tolerance and previous investment decisions to offer advice to the client that would traditionally come from human analysis and suggestion.

In a recent Barron’s article, “The AI Conundrum,” author Beverly Goodman talks about her experience with AI and her Fidelity brokerage account. Goodman says that each time she logs into her brokerage account, she gets a message suggesting she contribute to an IRA or Roth IRA. However, she is not eligible to contribute to either due to her income level and contributions to her employer’s plan. The company has obtained both of these pieces of information from her previously.

She decided to start the process of making a contribution, just to see what would happen. At no point did the system stop her from making the mistake of contributing to an IRA and only suggested she follow the IRS guidelines. While Goodman’s point here is that she understands the security of data issues with these sorts of artificial intelligence, she also thinks that brokerage firms could do better by using her information to benefit her.

I, however, see this in a different way.

In my opinion, this highlights the value of having a real human advisor who will pick up the phone when you call and with whom you are able to sit down and have regular face-to-face meetings. There is a benefit to having an advisor who knows you, knows your situation, who would not suggest -- multiple times -- that you should make an inappropriate IRA contribution knowing that you are not eligible.

Don’t get me wrong, I believe artificial intelligence has a place in the business. But I also feel there is an immediate and measurable value to having a point of contact who is a real person at your brokerage firm who knows who you are and what your goals and values are.

Artificial intelligence, which was once science fiction in books and movies, has now become commonplace technology. The rise in AI in our daily lives will surely continue. It carries with it conveniences but also risks and we must remain aware of potential pitfalls for our own security and peace of mind.

Nothing contained in this article should be interpreted as a promise or guarantee of earnings or investment results nor a recommendation for the purchase or sale of any security or sector.


Brittany Cox is a Registered Investment Advisor who works for Nestlerode & Loy, Inc., State College. She serves clients in Centre County and all of Pennsylvania as a fiduciary, fee-based advisor. She is a graduate of the Pennsylvania State University with a BA in business with a focus on financial services. Brittany enjoys working with clients for retirement and college planning. Brittany can be reached at [email protected]
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