There’s little doubt technology is revolutionising business. But what about investment? Finance is no less prone to change than other industries. Automatic trading programs can generate profits in seconds but have also been blamed for causing or amplifying flash market crashes. Do investment professionals have anything to fear from automation?
It may revolve around how much investors feel they can trust machines and to what extent they prefer the financial expertise of real living, breathing, thinking people rather than a program which may merely replicate the experiences of the past. Only those with 100 per cent confidence are likely to trust the algorithms and suggestions of the machine – and they would probably have been self-directed before the computer was invented.
Real life investing as opposed to machines risks emotions. But markets are all about feelings – grumpy traders with toothache versus cheerful characters with charisma – so get real, emotions cannot be swept away.
What about the learning curve? Non-machine managers gain from experiences whether good or bad. They understand subtleties of risk tolerance by doing well and profiting or by making mistakes and dealing with the consequences in a way that no machine can. Human fund managers can stand back – the machine keeps on going.
Ultimately, investors want humans in their financial orbit if for no other reason then they want to be able to praise the successful and blame the losers. No one can do that with a computer-driven algorithm.