It programs the exercises I like, takes into account possible injuries, monitors my efforts, corrects my form and sends me motivational messages. Thanks to artificial intelligence (AI), it now has the potential to create even more personalized workouts for even more customers.
I suppose AI could replace him entirely, but the fact that Doug is a real person is important. I know he’s watching and I believe he’s invested. I feel like I’ll disappoint him if I don’t show up every day. I wouldn’t care if he was a robot.
My experience with Doug is a case study in how to use technology to bring what was once a high-end personalized service to the masses. It is the future of not only fitness but also financial planning.
In fact, the entire service sector is on the verge of transformation. Just as the industrial revolution changed the way goods are manufactured and consumed, the technological revolution will have a beneficial effect on services.
Once a product can be produced at scale, its market can expand and be segmented; some people may want (and be able to afford) Birkin bags, while others prefer canvas totes.
The same goes for financial planning. This area is already in a state of transition. Firstly, the move to defined contribution pension schemes and increasing life expectancy means that more people need advice.
Planning for retirement is not easy; you don’t know how long you or your spouse will live, or what health problems will arise, and yet you must decide how much you will save, spend and invest. Sometimes you’ll just need someone to talk you out of selling when the market is falling.
A prevailing theory is that the more money you have, the more financial advice you need. But everyone needs help. And the fewer you have, the smaller your margin for error. Good advice is less about beating the market and more about planning and managing risk.
Traditionally, financial advisors — those who pay only fees — only took on high-net-worth clients, usually people with at least $1 million. But robo-advice, which has been around for more than a decade, has changed the economics of the field. Automated asset allocation has become accessible to more people, regardless of their net worth.
At the beginning, the first adopters were millennials, who were more comfortable with technology and did not have complex needs. AI can now provide even better advice, better tailored to individual needs and able to chat like a human advisor. It can even be trained to anticipate behavioral quirks that prevent people from making less-than-optimal financial decisions.
That said, the future is likely a hybrid model – the financial planner equivalent of my personal trainer Doug. In this hypothetical future, my financial advisor – let’s call him Warren – uses AI to help me design a personalized portfolio for me and for basic communication. This gives Warren more time for his primary function: managing our relationship.
A good advisor is both a financial planner and a therapist. They will force you to have difficult discussions about issues such as the viability of financing your 40-year-old son’s music career and end-of-life costs.
I suppose AI robots could get better at these kinds of discussions, but would you really want to connect with a robot after your spouse dies and you take charge of the household finances for the first time?
Or what if your child is facing a costly illness? People often rely on their financial advisors during difficult times. And they are willing to pay a lot for a human touch.
So far, the market for AI-assisted financial advice is small. But growth and segmentation are inevitable. If you have a trust fund, your advisor may use some technology but will still give you a lot of time and attention.
(In the US), if you have more than $100,000 but less than $1 million, you’ll likely end up with an AI-enabled human advisor keeping an eye on your portfolio while conducting these difficult discussions.
If you have less than $100,000, you’ll likely rely entirely on technology to manage your money — which, at least when it comes to portfolio construction, could soon be as effective as a high-end advisor .
Like I said, Doug got me into the best physical shape of my life. It’s not crazy to think that the same AI-assisted model could also help many people improve their financial situation. ©bloomberg