The road leading towards investing’s future is paved in binary code, algorithms, and processing chips. To that point, investing – at least from a human perspective – doesn’t change all that much from generation to generation since the concepts that underlie a free market – like supply and demand – are hardwired into what it means to be human. The mechanisms that facilitate supply and demand, however, have already started a rapid technical evolution that will only gain steam in the future.
Robo-Advising and You
At the forefront of the technological revolution taking place in modern investing are robo-advising platforms that offer investors a more efficient approach to asset allocation and rebalancing that isn’t susceptible to the dangers of human error and skewed perceptions. While asset allocations were still constructed by hand not so long ago, they are now built by algorithms fueled by vast reservoirs of data that a human being is simply incapable of processing.
This isn’t to say, however, that financial advisors and investment firms – at least how we currently know them – are on the verge of extinction. In fact, by providing a far more efficient means of allocating assets through robo-advising platforms, financial professionals now have the time and resources needed to truly understand the fears and aspirations of every client. Simply put, robo-advising platforms and human-driven financial advising should make for a powerful, efficient, and insightful combination for investors.
Younger Generations Drive the Marketplace
Given the complete comfort with technology seen in Millennials and Generation Z, a do-it-yourself mentality based on investment platforms will allow consumers to take charge of their own assets with the help of automated systems. This dynamic will place even more emphasis on passive investment strategies like ETFs and index funds that lack the fees associated with active management by tying themselves to various efficient market indices.
Blockchain Bolsters Security
Although Bitcoin received most of the initial publicity, it’s companion technology – blockchain – might be the most transformative of the two. With markets dominated by instant communication and computer-based trading, the need for a secure foundation grows by the day.
In blockchain, investment firms and trading markets have a technology that, if implemented properly, can provide significantly increased security through its encryption features, smart contracts, and enhanced transparency. While that might be a mouthful to most, to the investment community, blockchain represents a much-needed tool in the fight to a retain safe and secure investment environment.
Investment fundamentals might not drastically change in the near future, but technology will continue to transform how investing is conducted. Although investors accustomed to more traditional, even old-fashioned models will always have their place, the vast majority of investing’s future will leverage the speed, insights, and convenience that only technology makes possible.
Jeremy Wallace is founder and chief investment officer at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Jeremy has 20 years of experience in the financial industry and is passionate about helping clients preserve and enhance their wealth so they can pursue their passions. Jeremy graduated from Emory University with a degree in international economics and a certificate in financial planning. Outside of the office, Jeremy spends most of his free time with his wife, Julie, and their three children, Isabel, Lincoln, and Reid. He is an avid Chicago Cubs baseball fan, and he enjoys golfing with his wife and traveling with his family. Learn more about Jeremy by connecting with him on LinkedIn.