Almost two years ago AP, the Associated Press, started using robots to write business stories, distributed over the news wire to a myriad of publications. The Los Angeles Times now uses robots to write up the crime beat. Forbes mag is doing the same, getting bots to do reporting. And did you know about one in 10 Wiki entries was not created by a human? Then, of course, there’s Mark.
As you might have surmised, this questionable blog is authentic. There actually is a gnary old nob (albeit with a washboard stomach and rocky pecs) typing this, trying to make a difference by sprinkling financial faery dust over the masses. It’s not working, but that’s irrelevant. The cloud guys report that last year this site was accessed over a hundred million times. But since people are still house-horny, financially illiterate debt-snorflers, the posts will continue. Robots don’t care. I do.
In fact, these days you have to be more careful than ever. Robot cars are coming. Robot financial advisors are already here.
The latest is BeeMo’s SmartFolio, which marks the entry of the big banks into this robo space. There are almost a dozen other companies in the business of providing investors with low-fee, no-advice, auto-rebalancing investing on a discretionary basis. That means clients fill out a simplistic risk-assessment questionnaire and their money’s then invested without consulting them about what securities are purchased, or when.
The thinking is that moist Millennials, who actually don’t trust anybody and think TFSAs are for saving for hardwood, will feel more comfortable handing their money over to an algorithm rather than a person. This logic has been proven in the US, where giants like Schwab and Fidelity have jumped into robo with a vengeance. Odds are all of the Big Five banks here will soon be in the same space, either annihilating or absorbing the existing guys, like WealthSimple, NestWealth or Wealthbar.
Of course, bank-owned robos are there for a reason. To make money. BMO’s putting all of the new moister clients into its own family of ETFs, for example. It’s also hoping when their lives become more complex, they’ll graduate into working with (bank-owned) Nesbitt Burns advisors, who charge far more for the kind of sophisticated, brilliant advice you read here daily, for free.
No doubt, the strategy will work. Lots of kids with small sums to invest and a hate-on for fees (and old humans) have no idea where to start, and are suckers for a clean site with cool charts and blue graphics. A robot is probably a superior choice to [email protected], since at least you won’t end up with a clutch of blood-sucking bank mutual funds. But because every person reading this is different from every other person, a standardized portfolio and no individual tax or strategic advice has limits. So, be careful.
Now, how about robo mortgages? Also on the way. Check out the ad below which surprised a lot of people when they saw it for the first time last week, during that Super Bowl thingy:
Yep, it’s Rocket Mortgage – the creation of Quicken Loans, promising a 10-minute start-to-finish mortgage experience that you can complete on your iPhone. The system is fully automatic, provides a ‘locked-in’ approval of a rate and amount, and can automatically validate your income, job specs, down payment and credit rating. This, of course, is the future of lending. And it scares the crap out of many people.
In fact, following the SB airing, critics were aghast that unfiltered mortgage approvals secured in the same time most guys have a romantic interlude (including the shower) would lead to a new housing bubble. After all, let’s face it. Americans are like us. No discipline when it comes to borrowing. Without some condescending banker dude sitting across the desk asking probing questions and playing money cop, what’s to stop people from dialing up massive debt?
Well, the technology is impressive. Quicken employed more than five hundred software engineers and designers to invent Rocket Mortgage. It completely automates the underwriting and risk analysis function of lending, prices mortgages in real time, validates external documents mined from various databases, assesses the creditworthiness of the guy holding the smart phone, provides a guaranteed rate and allows for e-signatures.
And guess who has the resources in Canada to ape this? You bet. Our banks.
The big bot world is upon us and, like Adele, will be a mixed blessing. Algos never falter or fail. So whenever you get sick of perfection, just come here.