Why are we so risk averse when it comes to technology?
Unless you've been lost on a deserted island with a volleyball called Wilson, it's impossible to miss the massive advances in technology we have seen over the past few years.
Yet people are often wary of embracing technology as a means of investing. Is it an accessibility issue or are we less adventurous than we think?
Advances in artificial intelligence (AI) have been phenomenal, and the business community has been quick to embrace it. That's because AI enables us to run complex data models, predicting outcome probabilities in turbo-charged time without any emotion or bias.
From a consumer-facing perspective, AI has fuelled the growth of so-called fintechs - companies like the new breed of home loan lenders that can make a call on a loan application in a matter of minutes rather than days or weeks.
More recently, several fund managers in the US have introduced AI technologies to their platforms to gain a winning edge. It's a step that helps to overcome natural human biases that can lead to poor decisions such as being too quick to sell out profitable shares while holding onto poorly performing stocks.
These biases and emotions have made it hard for actively managed funds to beat market indices, driving the popularity of passively managed exchange traded funds.
On a personal level though people are often apprehensive about AI.
Maybe we've all watched too many Terminator movies. But consumers have often held mixed views around technology as a money management tool.
A 2019 UK survey found seven out of 10 respondents were comfortable with the idea of AI being used to care for their elderly relatives. Yet eight out of 10 didn't trust technology to manage their money.
However, sentiment appears to be shifting.
A 2021 report by tech giant Oracle - entitled Money and Machines, found COVID-19 has drastically increased financial anxiety and changed our relationship with money, causing us to turn to technology for help.
It confirms two in three people globally would trust robots more than humans to manage their finances. And six out of 10 now say they would trust AI with their money more than they trust themselves. Already, 27% of consumers use some form of AI to manage their personal finances.
This growing acceptance of AI is not just about saving time or making faster decisions.
While money can seem black and white on paper, the reality is very different.
Money is about more than finances. It's about emotions. It's about deeply held beliefs. And it's personal. Money gives us opportunity, choice and freedom. Our financial well-being also shapes our self-confidence. As the Oracle study notes, 54% of consumers globally believe their financial situation defines their self-worth.
A key advantage of harnessing the power of technology when it comes to sharemarket investing is that it takes away the emotion. As I noted earlier, these emotions and biases can hinder our investment choices, and worst case scenario, prevent us getting started investing altogether.
As we push forward out of the pandemic, new technologies - be it AI, digital assistants or analytics, are very much part of our lives. They are also impacting our personal relationship with money. As our trust in new technologies grows, investors are well-placed to be the winners.
Any advice provided is general in nature and does not take into account the viewer's specific needs and circumstances. You should consider your own financial position, objectives and requirements to determine the type of advice and products to best suit your needs. Jaaims Australia is an Authorised Representative of Jaaims Technologies, AFSL 519985.
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