Are Robots Coming To Take Investor Jobs on Wall Street? (nypost.com) 142
From an article on NYPost: More investors are warming to the cold, steely embrace of the increasingly sophisticated, low-cost automated robo-advisers. The primary reason is to save money on those fees and charges. Nearly one in three investors says these machines are superior at picking stocks and lessen their risk, and almost as many say the machines are better at selecting investments for retirement than human brokers, according to a new study of US investors by market research and consulting firm Spectrem Group.
wouldn't all machines come to the same conclusion (Score:1)
wouldn't all machines come to the same conclusion?
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They're all looking for the same outcome: making the most money. The "outcomes" you described are just different strategies for achieving that one outcome.
The evaluation function for AI financial advisors is ridiculously simple compared to many other applications of AI: how much money does it make? It'll just be an arms race of who has the best algorithms until an equilibrium is reached with everyone making the most money possible (probably a rate of return equal to world GDP growth), which will eventually
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Correction: they are all looking to make the most money based on what they perceive is an acceptable level of risk.
Someone with $10M might be willing to go "all in, make me the most money assuming I'm willing to lose 50% of it", while someone approaching retirement with $1M might be willing to say "make me the most money assuming I'm only willing to lose
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I'm not sure about you, but I have my assets tied up in a half-dozen different ways, depending on how liquid I need it to be, how much risk I'm willing to take, and what time period I'm looking at.
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MR=MC, maximum efficiency.
Bullshit. Utter, utter crap. Mathematically false. Empirically false.
A "typical marginal cost curve" is anything but typical. Nobody builds a factory that runs at peak efficiency when it's half full. No firm has a cost structure that matches your Econ 101 text book.
I highly recommend the work of Steve Keen [blogspot.com] in this area if you want to know more.
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Ah, "risk averse". Such a stupid concept when it comes to financial advice. The better way to plan a portfolio, is making sure you can meet your short to medium term cash needs without being forced to sell any long term investments if they temporarily turn south.
Distressed selling is the worst thing that can happen to your portfolio, and you should plan ahead to make sure you can avoid it as much as possible.
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That's what an index fund is, more or less. This sounds more like a custom portfolio, you tell the robo-adviser what kind of investment profile you want and it suggests stocks or combinations of stock to match your preference. Matching up investors with potential investments is a lot of what brokers do.
Re:wouldn't all machines come to the same conclusi (Score:5, Funny)
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All machines identically programmed with the exact same set of inputs will come to the same conclusion. Competing machines with different programming, and different set of inputs (or inputs that arrive at slightly different times) might come up with radically different conclusions.
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No, it depends of the insider trading information you feed into the bot.
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Most will. So will most humans. There will be some contrarian AI just like there are contrarian humans. And both will prosper as long as they are a small enough percentage.
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wouldn't all machines come to the same conclusion?
So what?. That just means that the investor will not beat the market in the long term but we all know that.
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Why? When you have two complicated systems doing the same basic thing that were written by two different teams, why would you expect agreement?
Does not matter (Score:1)
It's all fake work anyway, based on fake value which is in turn based on human judgment.
Abolish shares and put the money back where it belongs: employees. Not in the hands of a few hundred people.
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Employees owning shares is one of the great benefits a company can offer. Creates loyalty and incentives to be better for the company. It is a shame that more companies don't offer it.
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Everyone's moving away from having actual employees & staffing with temporary contractors. Loyalty is way down on their list of priorities.
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Moving away from actual employees is driving down the cost of products and services. If it is something so easy to do, that a robot can do it, then it wasn't valuable in the first place.
My suggestion for people today is to learn something that Computers really suck at, and/or requires real craftsmanship and/or which is hard work. Things that are difficult to attain are usually worth more than cheap trinkets everyone can have. Things of value are that way partly (mostly) because they are rare and desirable.
T
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Please suggest a lit of these things that a robot (or computer program) can't do better than a human can. Project that out for 10, 20, 30 years. Notice how pathetically small the list becomes and how few the actual humans needed.
Re:Does not matter (Score:4, Interesting)
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In my experience with a not-publicly-traded company that decided to create an Employee Stock Ownership Plan (ESOP), it was just a way for the owners to take cash out of the company without selling it on the market. Turns out they allotted shares worth 1/3 of the company to the ESOP, and had the coroporation borrow money in order to purchase those shares from the owners and give them to employees instead of contributing to 401Ks (I called it the "all eggs in one basket retirement plan"). The owners got cash and the employees got non-voting shares that dropped in value every year (especially 2009).
How is this taking money out of the company? Does it matter who owns the shares...employees vis-a-vis the general public?
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It's great for the company. As an employee, the company I work for is one of my last choices for investment. If the company does well, I'm not overly worried about my investments. If the company does poorly, I may be out of a job and need those investments.
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And you think the employees alone are going to be able to raise enough capital to, say, fund the construction of a factory?
If you're not enjoying the benefits of the markets, it is because you're not an investor. The solution is to buy some shares, not bitch and moan and covet the investments of those that do.
Re:Real problems (Score:2)
They already use algorithms to make decisions (Score:1)
It does not take a stretch of the imagination to think that after using predictive algorithms to make their trades (and a decade of hiring any quant they could find) they could eventually remove the human from that equation.
What does interest me however is what effect this is going to have on the market. A lot of predictive trading is based on the inherent irrationality of investors (e.g.: sell on any news). What happens when everyone has an algorithm? Meta-arbitrage?
Re:They already use algorithms to make decisions (Score:5, Insightful)
What happens when everyone has an algorithm?
Flash crash
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And everyone running the same algorithm creates a feedback loop that breaks the system horribly.
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Everyone won't be running the same algorithm - there'll be competition here like everywhere else.
The real money will be in researching robot flaws, and abusing them. Trick thousands of robot traders of brand X into performing some really weird transaction for their masters - and profit from the result of that.
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Presumably, the next step is an ai that works to find the perfect algorithm to beat all others. You'll have different AI's trying to outsmart each other. It will be like the Rock Paper Scissor AI programs that people have written that can consistently beat humans in what one would think should be random (but in fact isn't).
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Presumably, the next step is an ai that works to find the perfect algorithm to beat all others. You'll have different AI's trying to outsmart each other. It will be like the Rock Paper Scissor AI programs that people have written that can consistently beat humans in what one would think should be random (but in fact isn't).
They already have robo-investors that do that. It's the basis behind most high-frequency trading platforms (to outwit other high-frequency trading platforms). The problem with scaling this stuff down for the ordinary joes, is there's little to prevent the people who make the algorithms from frontrunning [investopedia.com] the trades on the side. In fact many people thought that is what Madoff was doing before it was discovered he didn't actually executes trades at all use the money as a ponzi scheme...
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The algorithms will know that other algorithms exist and that any information is instantly translated into buying or selling action, magnified by the other algorithms. End result? The market wildly oscillates between infinity (can't buy at any price) and zero (can't sell at any price) with nanosecond intervals of opportunity during each oscillation.
I hope so. (Score:5, Funny)
Robots or software? (Score:2, Informative)
There's a big difference.
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Let's give up already. The mainstream media is appropriating another word and diluting its meaning. Just like computer, hacker, etc.
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Language evolves. If it didn't, we'd still be speaking Proto-Indo-European. Words change in meaning, or in scope, and have been doing so since the first members of genus Homo began talking.
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> speaking Proto-Indo-European
Kard aghnutai mai!
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Languages may evolve, but the mainstream media is diluting the meaning of one word when more precise words already exist.
Car analogy time: the media now uses the word "cars" when talking about trucks, buses, trains, submarines, helicopters, planes and even spaceships. They're all "cars" now.
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Oh good grief. Does it really matter what forces cause language evolution? The media has been altering word usage and meaning since Gutenberg's press. If the word "robot" becomes a bit more expansive, what of it? In this case, I would argue the usage is metaphorical, so honestly I doubt the word's meaning is shifting as much as is being claimed, but even if it was, I think I've demonstrated my case. If language evolution didn't happen (whatever the cause), you would be able to understand Schleicher's Fable [wikipedia.org],
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I think the notion of reductio ad absurdum is that you can't actually find any citations, or any means of falsifying an opposing argument, so you just make exaggerated claims as to where that argument would lead if it were true. It's used by people too lazy to actually counter an opposing argument.
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Well your three word response certainly was a compelling rebuttal.
Re:Robots or software? (Score:5, Funny)
Personally, I hope for a set of Marvin's to replace brokers. That would make stock trading more fun for us.
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noun: robot; plural noun: robots
a machine capable of carrying out a complex series of actions automatically, especially one programmable by a computer.
Tell me why that doesn't describe this application?
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In the new definition, the phone could have lots of robots in it. A sufficiently complex app running on the phone hardware, is a robot.
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There's a big difference.
People have been referring to autonomous software programs as robots for decades.
So sad (Score:5, Funny)
Re:So sad (Score:4, Informative)
I'm crying all the tears for those rich wall street investors who will get outsourced. Really, I am.
Let me guess - you're a crocodile, right?
Re:So sad (Score:4, Funny)
Give a little thought to all the coke dealers and pimps. Unless they build robots that love hookers and blow, it's going to seriously damage those industries in NYC.
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I hear bending machines are into hookers but not blow. They do like alcohol though. And blackjack.
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But those investors probably have the lobbying power (i.e. bribery money) to stop bots/outsourcing, unlike the rest of us peons. Lawyers, doctors, and pharmaceuticals have invented barriers, such as country-specific practitioner licensing rules*.
Anyhow, the key to being an "investor" is talking customers into purchasing your advice, no? It's mostly a sales job, not a investment picking job in itself. The sale
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I'm crying all the tears for those rich wall street investors who will get outsourced. Really, I am.
You beat me to this
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This isn't the investors, it's the jerks who charge big fees to essentially flip a coin.
Stock picking is flame (Score:2, Interesting)
It comes down to the law of large numbers. You cant predict stock performance anymore than you can predict football game outcomes because too many variables and people are moving on the "field." Traders never outperform the overall market in the long term. Not EVER. Bots wont be better at it than humans since they run the same retard algorithms which are no more accurate than a gamblers "system." Buy an index ETF and avoid fees altogether. What a sales desk can do for you is give you access to unorthodox in
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Mwahahahhaha (Score:5, Insightful)
Wallstreet wants so desperately to increase the number of coders to make cheap labor. It is hilarious when coders fight back by diminishing the value of business people.
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> Wallstreet wants so desperately to increase the number of coders to make cheap labor. It is hilarious when coders fight back by diminishing the value of business people
You've mistaken the people one rung up the ladder from yourself for the bosses. The 0.001% will be quite happy to replace the business people with algorithms that further concentrate their wealth. We all serve at the pleasure of the 0.001%
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done already (Score:1)
Strange question. The big traders are already using algorithms for fast trading. This is where the big money is made. Manual traders can only lose againt those machines.
Sensationalist twaddle. (Score:2)
Please. They're computers not robots, and they've already been trading for years.
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Yes. Identifying, gathering and processing the market data is the only step to Investment advice. Trading requires all of that plus some extra decisions.
Human need not apply (video by CPG Grey) (Score:2)
Just wait till they make a law against it (Score:3)
"The Robot isn't licensed, so they are illegal" - now that it is the Wall St types, they will sing another tune
Re:Why would they care? (Score:1)
Robots ... (Score:3)
It has been shown in the past that Monkeys, Small Children, and even random number generators are better than most investors at picking stocks and shares to invest in ...
http://www.telegraph.co.uk/new... [telegraph.co.uk]
http://www.automaticfinances.c... [automaticfinances.com]
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After the stocks have been filtered down by human processes to things that have a shot, stock experts struggle to beat the other experts. Starting from scratch, computer programs and children might invest in companies producing perpetual motion machines or unicorn grooming.
Those jobs won't last long in the new economy (Score:2)
Why pay anybody? Including robots. (Score:3)
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This. Even Warren Buffett says you can't beat the S&P 500 over the long run.
http://fortune.com/2016/05/11/... [fortune.com]
If everyone's measuring against index funds, and no one can beat it consistently - then why not be lazy and chose the consistent winner - a stupid, fixed index?
That's zero lines of code, and I win over the long run.
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I'm personally invested in index funds, but I'm grateful that there are people taking greater risk for potentially greater returns to make the current environment possible.
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Vanguard invented index funds, and GP is suggesting people look into Vanguard funds, so you're both recommending the same thing.
ethics (Score:5, Insightful)
Given that the Trump administration is wanting to repeal of the Department of Labor's Fiduciary Rule and Section 1033 of Dodd Frank...
That is the rule where your financial advisor needs to act in the investor's best interests as well as disclose any conflict of interests.
A robot might be a much better option going forward..
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"programmed to always serve you."
Well, unless I program the robot myself, I'm kinda taking your word for it, aren't I?
History repeating itself ? (Score:2)
I thought it had already been tried with less complex AI in the last century.
They were basically selling when the price was dropping and buying when the price was rising.
The mass of automated idiots following the same rules led to an amplification of the effect and very soon : ruin.
I think this is the story I'm talking about [cio.com].
Let the robots take over Capital Hill (Score:2)
Will it also affect "financial advisors"? (Score:2)
I can definitiely see human traders playing less of a role. As HFT has gotten better over time, people are less reliant on traders going with their gut or even reasoned research. The trades move too fast for traders to keep up with anyway.
The next frontier is the advisors. Whenever I run into anyone who's a professional "financial advisor" I get used car salesman vibes. Every one of them is trying to pitch products guaranteed to make them money, but "not guaranteed - not insured - may lose value" on my side
Of course not (Score:2)
As someone whose whole professional career was on Wall Street, you can't take jobs that never existed. There are no "investor jobs" on Wall Street. Investor is not a job.
First, I work as a Financial Guy and... (Score:3, Informative)
First, I work as a Financial Guy. CFP, to be exact, giving advice. We see robots as competitors for low-end, low-margin accounts with people we probably wouldn't want to do business with anyway or people who we'd tell "Do these few things, build your savings, and as your situation becomes more complicated come find us or someone else you trust." Your average Broker or Insurance Salesman might be in trouble (miiight), for sure, but for those of us who give more complex advice and do financial projections, robots are going to be a looooong time before they replicate the kind of nuanced interaction people get with a full service advisor. Is your robot going to handle your spouse's death settlement paperwork and give you support in knowing someone is allowing you to grieve while they handle the bureaucracy of it? Is it going to give you a quick answer about your SEPP contributions (maybe, yeah), or know-how about your Solo 401(k) for your new business, the tax implications that may directly apply to you given your goals, help you put that together, keep it compliant? What would end up happening, since there are so many possibilities, is that a robot would end up asking so many questions that the person would simply give up and wouldn't be able to answer many of them even if they persevered.
Yes, we're computers, but we ask for all the data (ok, let's automate that), input it (automate this too!) then synthesize it given a process developed through exchanging Natural Language (which AI still has a hard time processing) with clients, then spit out advice. Those last two bits are real toughies.
Yes, it can happen some day.
We'll use AI as tools to enhance human advice; replacing it altogether would be nearly impossible/mostly foolish as others have also pointed out.
Yes, some people will come back and say,"Bu bu bu attorneys and CPAs are gonna be automated!" and to that I say the same as for us: Extremely basic issues? Sure, automate them! We want that too, it would make our jobs simpler so we can focus on the complex and interesting and important stuff instead of the mundane crap we're saddled with right now. Please please PLEASE automate the mundane shit! In fact, that's part of my job at the practice I'm in because our company is too slow/shortsighted/bureaucratic to make the tools for us.
Also.... compliance. When a person takes a robot's advice and shit goes south, who's liable? You think auto insurance is gonna get weird? The investment industry is MUCH more complicated (though simpler in some ways). Could it be done? I think so. It might actually be nice in some ways:
"James, bring up Mr. Blibbleblump's accounts please. What were his annualized returns, after fees, for the last five years? Please print us both a copy and notify Fidelity we're rolling over his ex-employer's 401k into a new IRA account here."
If that could be done by a robot... and it really should... that would make my life miraculous and wonderful. It would axe an admin assistant, but that stuff is menial, soul-crushing, and horrible. I'd find something else for that person to do such as direct client service or relationship-building or marketing.
Overall... I suspect it's a very long time away, at least for actual advisors and not just brokers. Even for brokers (I'm not as well-versed in this universe, but have known some fancy-pants ones), the complicated stuff is WAY more complicated than an AI can handle at this point, and even if it could someone would need to monitor it; the big boys will still have jobs and I suspect it will stay that way for a while.
Also, Betteridge's Law, so "No."
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Should be SEP, not SEPP. Two totally different things.
Yes and No (Score:1)
I was just reading the book "Dark Pools" and I think we can make the following predictions:
1. Robots (AI or bots) are already replacing humans and have mostly finished doing so.
2. Robots can go wacko and lead to 80 percent drops in an entire market in a matter of minutes. In fact, they have already.
3. The "better performance" of robot trading is in fact, not that much better than your standard decent low-cost index mutual fund or ETF. 7 percent total return is pretty abysmal, actually, and half of your earn
The Next Big Step (Score:3)
Neuromancer (Score:1)
Is that the prequel to William Gibson's Neuromancer?
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Go ask your friends for whom they are ultimately working - as in: Who is ultimately earning the profits. You'll find that today already a large share of people are working for mega-corporations of such convoluted ownership structure that they cannot name the human(s) to whom the profits flow (and the CEO is rarely the owner).
Chances are that many corporations are already owned by institutions that leave their business decisions largely to computers.
Smash the robot on your last day! (Score:2)
Smash the robot on your last day! You may go to prison but the doctors there cover more then the ER and no pre existing conditions + free room and board.
Robots need an infimally successful portfolio to.. (Score:1)