From goats to algorithms: navigating investment risk in the age of information overload
Joshua Slocum famously lost key navigation information when his only chart of the West Indies was eaten by a goat in 1898. That was unexpected! No doubt had he gone digital the chances of being ship wrecked would have been reduced not totally avoided. Today's abundance of data can be as much a hazard as a help if it is not handled critically. Trust but verify are watchwords for all investors as they cast around for higher more consistent returns when traditional asset classes are behaving in an unhelpful way.
On doing a review of many investment firms' websites a lot of areas are out-of-date, not helpful and create more confusion than support. No doubt many managers are bored with passive investing - that "set and forget" approach which is cheap to manage but doesn't do much for investor returns except keep all in the pot of "same, same mediocrity". Consolidations in an industry once known for great fees, good jobs, not too hard with great salaries, bonuses and perks not enjoyed by many industry sectors whose funds they are managing, have reduced the pool of interested talent that may have been drawn to the industry. It's no fun anymore! The sheer size of firms such as Blackrock with $14 trillion and its plethora of funds - not all doing well by a long shot, puts off many smaller investors whose interest cannot be protected within the soul of such a behemoth.
AI - check and recheck for hallucinations, self- help Bots managing the mundane but spouting garbage for more complex matters can increase the risk dial for wealth managers and clients. The trouble for financial advisors, asset management firms is that clients want to be treated with respect and feel valued irrespective of their investment pot. This is happening less and less. Speak to some modest KiwiSavers for evidence of blanket solutions for all because its cheaper.
Information abundance does not lead to better investment outcomes. It can lead to dangerous complacency by advisers if each layer of data is accepted at face value. We look forward to change in industry sentiment in these "unprecedented, volatile times" - oh dear not those words again!